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Grow Your Numbers – Improve Client Retention

Posted 4 years ago in BUSINESS DEVELOPMENT

The simplest and most cost effective way to grow your business is to make sure you don’t lose clients.  Unfortunately, and possibly because we often take customers for granted, it’s a strategy that is so often overlooked.  The most practical way to bring the focus back to your existing clients is to understand their lifetime value to your business.


Lifetime Value (of a client) = Spend x Margin x Lifetime


Spend = the average annual spend that customer will have with you.  Or put another way, the total sales you make to that customer on average every year.

Margin = the profit you make on that customer; the sales to them less the costs of making that sale (the costs are often referred to as variable or direct costs and include such things as materials and labour).

Lifetime = the average number of years clients are retained for in your business.


Let’s look at the example of a hairdresser.  Imagine the cost of a simple haircut is $50 and, on average people have 8 haircuts per year.  The average spend is therefore $400 per annum.

The cost of a haircut is one hour of wages (say $23) and a small amount of product (say $2).  The margin is then $25 (50%) per haircut or $200 per year ($25 x 8 haircuts).


Let’s say that on average, customers stay with the same hairdresser for 10 years (lifetime = 10 years).  The lifetime value is therefore $2,000; $400 x 50% x 10 years.

If our example hairdresser remembered that, on average, every customer (new or existing) is worth $2,000 to the business, what could be done to delight that customer?  Here are some ideas:


  1. Provide a welcome gift
  2. Have a loyalty programme
  3. Run special events for clients
  4. Keep in contact by social media / phone
  5. Do in-store promotions
  6. Improve hospitality to clients while they’re waiting
  7. Reward them for referring more clients
  8. Follow them up if you haven’t seen them for a while
  9. Ask for feedback on how service can be improved
  10. Ask us for 10 more ideas J

Have you worked out the lifetime value of a client to your business?  What do you do to delight your clients?

It takes months to find a customer and only seconds to lose one – Vincent Lombardi


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