Hereâ€™s a quick story about how not understanding the long term profit value of your clients and customers can cost you dearly. Make sure youâ€™re not doing this in your business!
Prior to our move back to North Carolina, I did some research for a progressive dentist who uses digital X-Rays and non-mercury fillings.
I found one who looked great and on inquiring via email about any new client specials was told that yes, they had one for $157. This included a full set of digital X-rays, a cleaning and exam. This seemed like a reasonable price to me. I told her it would probably be later in August since we would need time to settle in.
Last week I called to set up my appointment. Again, I was very impressed with how the staff talked with me as a new client. I even had the thought that sometime in the future I would write an Ordinary Brilliance article about how great this business is.
I mentioned that I had talked with someone earlier in the year and that she told me the fee would be $156. There was no specific response to this, so I thought all was well. They sent out a very nice welcome packet. In the packet it listed the fee for my visit as $212. This was 35% more than what I had been told, so I called up.
This time, I actually got the same woman I had talked to a few months prior. Oh, she said, that was a special going on at the time, but not now. Oh, I said, well I told you then that I wouldnâ€™t be arriving in North Carolina until a few months later and you didnâ€™t tell me that special would no longer be in effect.
â€œWell, do you want to keep the appointment?â€ she asked.
â€œWeâ€™re here if you need help in the future,â€ she concluded.
I was really surprised she didnâ€™t honor the special. The result? The dentist â€œsavedâ€ $56, but in actuality they lost thousands.
What is the Lifetime Value of a Customer for this dentist? I donâ€™t know about you, but I tend to see a dentist regularly, and the same one. Since I plan to be here for a very long time, this dentist missed out on 20 – 30 years of servicing my dental needs. Iâ€™m not sure what his net profit margin is, but Iâ€™m sure weâ€™re talking thousands of dollars of net profits. I think he was missing the forest for the trees, as the old saying goes.
What about you â€“ are you splitting pennies and not focusing on the long-term value of a new customer? You MUST know how long the average client stays with you and what their average purchases are per year.
Then, and only then, can you make a reasonable guess as to what you can afford to spend to get a new customer. Donâ€™t make the mistake this dentist did and â€œsaveâ€ a few bucks and miss out on thousands of dollars of profits. Know your numbers and empower your staff to do the right thing for your long-term business success.