[Crowd Leader: David Bratvold] What's the Value of A Single Customer
If the next person to stand in front of you (or your website) were going to end up costing you $50, would you complete the transaction? Or would you focus on the immediate loss of revenue and decide to blow them off? With each decision, you're deciding if a potential customer is worth the cost or not. An experience with Toyota, recently, got me thinking about these customer costs.
Within about 500 miles of driving off the lot with a new Toyota, the maintenance required light came on. It was simply in need of an oil change, so I took it to a separate dealer in San Diego near my office that stated, over the phone, they'd gladly honor the 2-years of free oil changes I purchased at the original dealer. As I thought about customer acquisition on my drive in, I realized they're about to acquire me as a new customer for life. Every oil change, every routine checkup, & every time my brakes fail on a high speed Sunday drive, I would be taking my car to them - without question. Most likely because of the great experience I was about to have on my first trip.
The only problem is, my first trip wasn't a great experience which led to me think, "I'll never go back to that dealer."
This got me thinking about my company - What's the long-term value of a single customer? It also got me thinking about crowdsourcing companies & how much their customers potentially bring them. For 99Designs, the value is $39-$100. Unless they have repeat customers, then it's multiplied. $80- $1000+. 99Designs places a high value on customer satisfaction, as evidenced with their industry standardizing 100% money back guarantee. It's worth more to them to have a thrilled customer tell a friend than miss out on a couple hundred bucks.
So how much are you willing to lose in the beginning?
The San Diego Toyota dealer's potential value from acquiring me as a lifetime customer could've been $800 - $40,000+. However, when I arrived at the dealer they informed me my free oil changes weren't valid with them - only at the dealer across town. They didn't see the logic in covering the $10-$20 cost to offer my first oil change free as a "Sorry for giving you the wrong info over the phone." To that dealer, I wasn't worth eating $20 when it was clear this was my first time in their dealership. I realize each dealer is ran independently from the Toyota manufacturer, but is an unsatisfied customer Toyota's responsibility? What happens if unsatisfied retail experiences begin hurting the manufacturer?
A friend recently purchased a Kindle from Best Buy only to have the screen die two months later. Trying to resolve it with Best Buy proved to be a problem no one at the retail behemoth cared to deal with. On a whim, my friend called up Amazon to explain the situation. Amazon responded by immediately shipping a brand new Kindle, with a pre-paid retun label inside for him to send back his defective Kindle. In this scenario, the manufacturer stepped in to wow the customer when the retail store refused. Cost to Amazon: $10 - $50, but now has a loyal customer for life. Cost to Best Buy: $0, but now has another individual that refuses to step foot in Best Buy.
When I get to the end of my career, I want to know that I wowed every single person I did business with. I'll have made money off some of those people, & probably not made money off of a majority of them. But as long as I've wowed everyone I'll consider it a success. I want everyone who interacts with my site to tell their friends, "That's the best site for crowdsourcing ____...."
How much are you willing to lose to acquire a lifelong customer?