Customer Lifetime Value: What’s a Guest Worth to You?

This post was originally published on NextRestaurants.

By Brandon Hull

Ever calculate your customer lifetime value?

Want an easy calculator to do exactly that?

Customer lifetime value is an important number to identify because it should factor into how much you’re willing to spend to acquire new customers. The value of an average Starbucks customer, for example, is probably worth far more to Starbucks, than your average customer is to you.

Even if that Starbucks customer only spends $5 per visit, they’re visiting every day — maybe multiple times per day. Unless you operate a coffee shop, your slightly-more-loyal-than-average customers don’t visit anywhere near that often.

In fact, let me ask you that: do you know your customer frequency?

What factors should play in to your customer lifetime value?

To help you do this quick math, we’ve created a free and simple Customer Lifetime Value calculator for you to work with. It’s nothing advanced or scientific, just good straightforward math and specifically aimed at restaurants.

But here’s the thing: the more restaurants you can help us persuade to use it — as simple as it is — the sooner we can provide some interesting benchmarks, with full confidentiality.

You can use it free of charge with no personally identifiable information, and even bookmark the page to use in the future if things change on your end.

Here are the factors we’ve used to help calculate customer lifetime value:

  1. Your average customer spend per visit.
  2. Your average customer number of visits per year.
  3. Your companion rate (the number of people that comprise a typical customer visit).
  4. Your restaurant’s profit margin.

We calculate these along across seven years. Why seven?

Restaurant loyalty comes and goes. New restaurants hit the market. New brands gain favor and momentum via word-of-mouth and social media. Seven years feels like a good number, though we will not tell you it’s a scientific one…yet.

If you knew, for example, that your typical customer spends $750 with you over the course of 7 years, that should play into how much you’re willing to spend to attract that one customer.

What’s the other factor that you can optionally calculate?

We’ve taken one additional, optional step of helping you see the Lifetime Profit Contribution of a single customer as well on this form. Knowing how much revenue is great — and crucial. Knowing how much profit in your wallet that an average customer generates is even more vital.

Of course, you can run these calculations on any slice of your loyal customer base. Your Evangelists. Your Frequenters. Your Special Occasioners. You should know how these numbers compare.

Let us know what you think of the calculator. Please share with your peers as it will remain permanently free.

 Brandon Hull

About the author
Brandon is the original founder of NextRestaurants.com. He has helped thousands of restaurants implement innovative marketing strategies, campaigns, and tactics by incorporating new technology, in order to attract loyal guests.




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