Here’s a quick story about how not understanding the long term profit value of your clients and customers can cost you dearly. Make sure you’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 wouldn’t be arriving in North Carolina until a few months later and you didn’t tell me that special would no longer be in effect.
“Well, do you want to keep the appointment?” she asked.
“We’re here if you need help in the future,” she concluded.
I was really surprised she didn’t honor the special. The result? The dentist “saved” $56, but in actuality they lost thousands.
What is the Lifetime Value of a Customer for this dentist? I don’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. I’m not sure what his net profit margin is, but I’m sure we’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 – 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. Don’t make the mistake this dentist did and “save” 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.