Sales Training Tip - Why You Must Know the Lifetime Values of Your Customers

Salespeople often ask me, 'How do I earn more money?' or 'I work really hard, how can I find more time in the day?' These are really great questions and will help you to focus on sales behaviours which will start to get you awesome sales results. Obviously, there are no quick answers to questions like these because it's a combination of a variety of factors. That said, there is one area which most salespeople know about but few spend enough time thinking about and that is the lifetime value of your customers...

What's the lifetime value of your customers? Do you know? Really? Do you have demographic splits so that you know the differences between customers?

You should have...

As you might expect I do a considerable amount of travelling for motivational speeches and sales training seminars. Because of this I am sometimes away so much that I run quite late paying my bills. I have found that mobile phone companies in particular do not give you very long to turn their bills around. If a bill arrives on the first day that I am away and I am away for 10 days or more I can often be late on my payment even if I send the payment the day I get back.

About a year ago, as a direct result of this, I got cut off for a few hours. I rang the phone company up, expressed my displeasure and paid the bill. During the course of the call I asked them if they didn't think it would make good sales sense to warn me that I was late and that they might cut me off rather than just do it? They said that they did text and ring some people but not everyone. I asked who they rang and they said it was random... I pointed out to them that this was ridiculous as I spent £300+ per month and asked if, in their opinion, that did not warrant a call. 'No' they said, 'We treat all customers the same!'

Now that may be fine in the anodised, politically correct world of non-sales but in a sales environment it's frankly ridiculous!

Let's take a typical low usage mobile customer... 18 years old, changes mobiles every year (new mobile worth £500) to stay up with the latest fashion and spends £20 per month. How can this make sense? Let's look at the figures...

18 year old... Cost of phone £500 Value of calls £240 Loss £260

Me... Cost of phone £500 Value of calls £3600 Number of years (unless peeved) 20 = £72,000 Profit £71,500

That's like selling a Porsche! If the mobile phone company were going to be signing up a £71,500 sales they'd do virtually anything for it. They'd wine me, dine me and take me out. But because it's not in one go - they can't see it. The irony is however that they already have the deal with me... they just have to keep it!

Now, I'm not saying that they shouldn't provide a great sales service to everyone. Nor am I saying that I am special. What I am saying is that if you're a salesperson and you treat me and the typical 18 year old user the same it's going to cost you money - big money! No matter what you do - the 18 year old will probably move to a new supplier because they can. And even if they don't their usage is unlikely to pay off the initial up front costs of the phone. I, on the other hand, am money in the bank from month 2. And I don't want to move because it's easier to stay.

Suffice to say I moved... lost sale nearly £70,000. Anyone get kicked for that, nope. Anyone ring me back, nope. Anyone care, nope. Yet, that company is still spending millions on advertising for more loss making cutomers...

Go figure!

If you spend more time / effort on customers with high lifetime values you will have more time to find more high lifetime value customers and will have to spend less time servicing accounts that are not profitable.

Happy hunting. Gavin.

p.s. Join my Sales Success newsletter now at www.gaviningham.net or call 0845 838 5958 to find out more about my sales seminars.

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