Marketing for our clients requires a little math. Why math? We need to figure out the cost and value of keeping a life time/long term customer, compared to the cost of getting a new one-time customer. Our type of marketing also requires building relationships with your customers. We believe that maintaining long term relationships with your customers is more valuable and more profitable than attracting new customers through traditional marketing methods.
Take this scenario for a restaurant marketing client: casual diner Bob eats here 2 times a month. His average tab is $45 dollars a visit, or $90 a month. So this year, Bob is worth $90 x 12 months or $1080 a year. Let’s say Bob sticks around for only 18 months. This means Bob’s lifetime value for 18 months, is $1620. That’s a lot of cash!
So how do we market to Bob? Well, first of all, we have to understand that we need a relationship. But we also need to do things to reward him as he grows in his relationship with us. After all, it’s pretty rude to never say thank you to someone who does nice things for you.
What should the rewards look like? Well, when was the last time he came in with a group, and you offered the entire group free desserts on the house—just for fun? Never? Well, think about the food cost to do that compared the marketing expense to get another Bob to come for the first time and stay. It’s probably worth a ten dollar food cost for the entire table to get something special that they will talk about for several days to come – and probably on social media where hundreds of folks will hear their testimonial.
Sometimes spending a little of the commodity you have to keep a good customer is much better than spending unknown amounts to reap unknown rewards. Keeping customers happy and returning by building relationships (with or without free food) can be far more successful than procuring new customers through unmanageable and unverifiable means.
Don’t be like AT&T! What do I mean by that? Well, have you noticed that if you want to get a great deal from AT&T, you can’t be an existing customer? If you already have their service, and you’ve faithfully spent thousands a year on their service and their phones, you can’t get the cheapest deal on their phones!
Sounds backwards, doesn’t it? Take care of the customers you do have, so they’ll do the heavy lifting and bring their friends to your establishment.
And that will be some of the best marketing you’ll never have to do!
Photo Credit: Andy Chapman taken at Bravo! Restaurant in Jackson, Miss.
** Editors Note: After I wrote this article, I was in one of our clients local soda fountain, burger joint. I asked if I could mingle and talk to customers (one of my favorite parts of the work I do). I met a doctor who told me that he’d eaten there every Wednesday for 40 years. (They start making his order when they see him walk in, it’s the same thing every time…) To use today’s dollar value let’s calculate the dollar value of those meals. That’s 52 x 40 or 2080 meals. For an $8 meal, that’s $16,640 and counting, not including the friends he’s brought to visit, and the grandchildren etc. There’s some lifetime value. - Andy
ATT has it backward indeed. But hey, they’re too big to fail, right? We all learned that lesson and we know the answer.
Customer service and customer retention is critical. Everyone needs to recognize the lifetime value of a customer, and sometimes we need to be reminded.
Thanks Andy!
Two years ago when husband and I bought our third business, I spent the first three months giving out samples of lotion that cost us 50 cents to every customer that came in the store on the days that I worked the floor. I gave out the samples whether they made a purchase or just strolled through. I totally changed the atmosphere of our store from the previous owner. Several people actually returned and bought product averaging $50 per item that I had given away a sample. Word soon got around that the atmosphere had changed and our store was much more friendly.
My daughter has started doing a similiar marketing technique to the children of shoppers. By giving them a small product that they can use at school, she is creating future shoppers in an adult store. The faces of the children light up and the moms seem happy that their children have been treated special.