IDEAS

Who’s Your Best Customer?

Ask a business owner who their best customers are, and chances are they’ll tell you about the ones who spend the most money. Their biggest accounts, their most frequent buyers, the people with the highest lifetime value. Fair enough. Revenue matters. It keeps the lights on.

I’ve spent a lot of years working with real estate agents, and I’ve seen something interesting. Some of the most valuable people in an agent’s business haven’t bought or sold a house in years. They may have bought one modest house twenty years ago, yet they’ve introduced the agent to half the neighborhood. Meanwhile, the client who bought a million-dollar property might never have sent a single referral. Which one is more valuable?

Of course, the answer depends on how we’re measuring value. That may be where we get ourselves into trouble. Businesses have developed pretty sophisticated ways to calculate customer lifetime value. We look at average transaction size, purchase frequency, retention rates and the cost of acquiring a customer. All useful information, although it tells us surprisingly little about the value of the relationship itself.

What about the person who introduces you to your next business partner? The customer who gives you some uncomfortable feedback that helps you fix a problem? The person who recommends you every chance they get, even though they haven’t purchased anything in years? There’s an enormous amount of value flowing through relationships that never shows up on an invoice. The Relationship Value Matrix is one way to start seeing it.

A database of 1,000 names often holds less value than 200 relationships that somebody has genuinely taken care of. We count names because they’re easy to count. We measure transactions because they’re easy to measure. Then we make decisions about where to invest our attention based on those numbers. I wonder how much opportunity we’re overlooking simply because we haven’t figured out how to see it.