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Franchisees: What business are you in?
That’s a question every franchisee must answer, and every franchisor must help its franchisees answer.
Get in the right business now
Until you know what business you’re in, it doesn’t make any sense to put a value on a customer. So, just in case you’re not in the right business, and you didn’t read my April 13 blog, please do both now (read this).
So what’s a customer worth to you?
Depends on how long you keep the customer, doesn’t it!
Calculating customer value
Some franchisees say a customer is worth one sale. For example, if the franchisee sells a product or service that costs $1,000, then the customer is worth $1,000.
That’s one way of looking at it. But probably not the best way.
Sell to the same customer for a lifetime
Other franchisees say that a customer is worth a lifetime of sales.
I like that!
If the franchisee sells a product or service for $1,000 and over a period of time (the proverbial “lifetime”) the customer buys 10 times, that customer is worth $10,000.
Customers want to buy repetitively
The sad truth, however, is that few customers ever get an opportunity to buy for a lifetime, whether that lifetime is a year or several years (the average lifetime for a retail customer in the USA is estimated at 7 years).
What’s worse, franchisees are losing money (sometimes losing their businesses) because they don’t understand customer value. They get a customer, make a sale or two, and then lose the customer (often without even knowing what occurred). There goes thousands of dollars of value!
One-time buyers take away value and profit
Typically, a customer makes a purchase and never returns.
Gets worse. If it cost you, the franchisee, $100 to get that customer to come into your business, and the customer’s purchase was less than $100, you got a problem!
It’s difficult to capture a customer, and it’s equally as challenging to keep a customer. However, many franchisees spend all their time, effort and money on the first part of the equation, only to lose their profit (and possibly their business) by neglecting the second part!
It costs less to keep than to capture
Now here’s some good news. Whatever it costs you to capture a customer (see my April 15 blog about calculating the cost of capturing a customer), it will cost you less to keep that customer!
Future blogs: I’ll share the formula for calculating total lifetime customer value and some ideas for keeping customers!
Register now for free tele-seminar
. . . Know someone who’s buying a franchise? Encourage them to register for my free franchise tele-seminar: How To Buy A “Hot” Franchise And Not Get Burned! I’m giving subscribers to my blog the first opportunity to sign up for the tele-seminar and get an unbelievable package of information about franchising — all free. Later today I’ll begin promoting the tele-seminar to thousands of prospective franchisees and once the available slots are filled the tele-seminar will be closed. Share this early notice with your prospects and friends — they can sign up now and take advantage of this opportunity.
Photo image by: sirtrentalot
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