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The Lifetime Value of the Customer
As an owner/operator when you get directly involved with a customer, there is an 83% chance for repeat business. Surveys reveal that customers feel there is no greater honor than being acknowledged by the owner. Three things happen that cannot be matched by anyone else. First, the customers have their psychological “need to belong” satisfied. This is one of the most important human needs. Abraham Maslow developed the concept known as “The Hierarchy of Needs.” He states that when physiological needs and safety needs are, by and large, taken care of, a third layer starts to show up. You begin to feel the need for a sense of community. In our day-to-day life, we exhibit these needs in our desires to marry, have a family, be a part of a community, a member of a church, a brother in the fraternity, or a part of a group. The special recognition by the owner makes customers feel important and satisfies the need to belong. Second, if the owner does something special for the customer, whether it is remembering your name, buying a round of drinks or “comping” a appetizer or dessert, it reflects the caring attitude of the restaurant. The third thing you can do as an owner/operator do like nobody else is say thank you! Gratitude expressed by the owner conveys the business was appreciated. This type of service will ensure repeat business.
As an owner or manager you should be aware that everyone has a psychological need to belong. Therefore it is important to know your customers. How many customers do you know by name? Last name? Where they work? What do you know about their families? Customer loyalty takes a long time to build.
You should have an understanding of the “lifetime value of the customer.” The basic concept is that you and your staff must treat every sales transaction as the beginning or the continuation of a lifelong relationship. You should not focus on a one-time sale. A lifelong customer will tell his family, friends, coworkers and community members about your relationship.
Once you have earned a customer’s loyalty and trust, your customer base will expand and your business will thrive. Let us not forget we are in the business of sales!
According to Kotler on Marketing, the stages of creating a lifelong customer are:
First-time customer- The probability that the new customer will buy again is strongly related to his level of satisfaction with the purchase.
Repeat customer- Retained customers buy more over time if they are highly satisfied. This happens through cross selling (different item menus) and up selling. The cost of serving a retained customer decreases over time, they recommend the restaurant to others and they become less sensitive to price increases.
Client- In the restaurant business, we use the terms customers or guests. Professional firms use the word “clients”. What is the difference? Professional firms know more about their clients. Second, they devote more time to helping and satisfying clients. Third, their relation to the client is more continuous and leads to more familiarity and empathy.
Advocate-The more a client likes the restaurant, the more likely he is to talk favorably about it, either when asked for an opinion or without. The aim of every restaurant should be to create fans! Fan is short for fanatic, which for example is how Harley-Davidson motorcycle owners feel about the Harley-Davidson Company and its products
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Member- To further “loyalize” clients, restaurants might launch a membership program that has privileges.
Click here to calculate the lifetime value of your customer.
Link:
http://www.haleymarketing.com/c_calc.html
Related Article: Link http://www.dbmarketing.com/articles/Art112.htm
