By Sharon Burton, Content Strategy Consultant
In the last article, I discussed customer churn and how it’s a bad thing. I also talked about the cost of acquiring customers.
In this article, we’re going to look at resell and incremental spending and how they impact the company bottom line.
An average company loses between 10 – 30% of its customers annually
Incremental spending is when your customers like your product(s) or services so much, they buy more. This is a good thing for many reasons, but it’s especially good in terms of dollars for 2 reasons:
- Higher lifetime value
- Cheaper customers
Higher lifetime value means the customers stay engaged with you and continue to spend money with you. The longer you can keep a customer, the more that customer is worth to you in dollars. That’s called the Customer Lifetime Value (CLTV).
For example, I’ve been with the same cell phone company for the last 15 years. They should love me, as my lifetime value to them is in the 10s of thousands of dollars. I would expect them to be my best friend.
Why should they be my best friend? Because I’m cheap to them. They don’t need to spend any marketing or sales dollars to keep me. Year after year, I give them $xx dollars and they make no effort to get it, except to keep the cell network alive, which they don’t do for me specially. I’m the perfect customer from their point of view. My CLTV is very high.
When you have a high customer churn rate, every customer costs a lot to get and to keep. The goal is to pay to get people in the tent and then keep them there, spending money every month/year/some period of time.
Sharon Burton is a Content Strategy Consultant.