Customers are very opportunistic in nature, they can switch over to a competitor very easily. Free trials, flash sales, celebrity endorsements are some methods your competition is trying to use every day. But there is one card in your hand which is of immense value – its called Great Customer Experience. This will shield you from all that the competition tries to bait your customers.
So how much do you value your customer experience? Let’s find a way to give it a number, so you can add it to your balance sheet.
Depending on the industry and your position in the industry (if you are a monopolistic player or a commodity seller) the percentage of customers who speak to you about dissatisfaction may vary. Research suggests this number is 10% when averaged out across geographies and industries. This means, 1 in 10 dissatisfied customers will complain to you about their experience – the other 9 will simply walk out to probably never come back !!
Next, let’s look at the average transaction value of your store. If you are a grocery store vs a high-end retailer this value will vary. But think about this number, if needed look into your accounting software and do simple math. Total Sales / Number of invoices. This is your average transaction value.
Now to a very important question – how sticky is your product? A simple way to look at this is how often does your customer visit you in a week, in a month, or in a year. Depending on what service you offer you can take this number and standardize it for a year.
So if a customer visits you every day – then its 365/year
If it’s once a week – then it’s 52/year
If it’s once a year – then it’s 1
Lastly, we bring in loyalty in the calculations. How long has the customer been visiting you? Answer this in years. If you have a CRM system, this can be easily done. Locate your customer’s first transaction date and count the number of years till today; Repeat for every customer and get the average.
So you should have these numbers with you by now
- Number of complaints received in a month, let’s call this A. And let’s assume you had 10 complaints this month.
- Average Transaction value, let’s call this B & let’s assume this Rs 1000/-
- Number of visits per year, let’s call this C & let’s assume this is 20
- Average lifetime of customers, Let’s call this D & let’s assume this is 3
Your customers lifetime value is Rs 60,000/-
Calculated as : B * C * D. (for our example it is 1000 x 20 x 3)
Now let’s assume you received 10 complaints this month. We already know about 1 in 10 dissatisfied customers will talk to you about their issues, the other 9 have walked out without communicating. So your real number of dissatisfied customers is 100 for this month. And that makes 1200 in a year.
Not all who are dissatisfied will never come back, don’t be so harsh on yourself. You have over the years built a positive reputation and goodwill. But remember if you are a new business it’s going to be closer to 100% and for an established business that does not have a pure monopoly in the segment, we can assume this number to be 70%.
So, being optimistic the number of customers who have walked out to never come back will be 70% of 1200.
That is you stand to lose 840 customers this year with a lifetime value of Rs 60,000/-
The total loss to your business is 840 * 60,000 = 5,04,00,000/-
About 5 Crores lost in lifetime value for your business when you had 10 complaints a month.
We have not included in this calculation the cost of acquiring a customer and building loyalty to an average of 3 years.
BuzzNgo is a customer engagement tool, which helps you collect more data about your customer’s emotions in the moment of experience. If you are a retail store, we recommend at least 1 kiosk per store. If you have a web site then you can deploy our web widget which takes less than 60 seconds to implement.
Remember, 10 complaints led to 5 crores of revenue loss. Calculate your score and write to us on [email protected] and we will be happy to discuss the optimum solution for your needs.