Loading How much is one customer worth to you?
Let’s break it down using the example of a realtor. If a realtor gets just one half of the sales commission they will get 3.5%. Let’s be conservative and suppose that a buyer’s realtor sells a house to a young couple for $100,000. So at 3.5% that would be $3,500 in commission.
Now, according to the U.S. Census Bureau, the average person moves 11 times in their life which averages out to every 7 years if a person were to live to their mid seventies. To be conservative we will say that the young couple moved 4 times when they were children, so they have another 7 times to move in their lifetime.
Now, the smart thing for the realtor to do is stay in touch with this young couple on a regular basis. If the realtor does this the couple is that much more likely to use them again. So what if the next time the realtor not only lists the home that the couple is selling but also sells them another home.
If each home was only sold at $100,000 … (which isn’t very likely as most people progressively buy more expensive homes throughout life as they get raises, switch jobs, or both partners begin working, but this makes the math easier)… so if each home was only sold at $100,000 the realtor would get another $3500 for each of the two homes.
So, $3500 x2 would equal $7000 added to the original $3500 for a current lifetime total of $10,500.
If we multiply that $7000 x6 for the remainder of times that the couple moves and add the original $3500 we get a grand lifetime total of $45,000.
That doesn’t even take into account if any of the homes are higher than $100,000 or if the realtor is able to be both the buying and listing agent on any of the sales. That also doesn’t take into account any referrals that the couple might provide. Realistically, the couple could easily be worth well over $60,000 over their entire lifetime.
Granted, there are some expenses in doing this, but it is a heck of a lot easier to keep this person as a customer than it is to continue trying to find new clients constantly. It is just like farming. You have to keep sowing to keep on reaping.
Now think about this. What if the realtor hadn’t continued to follow-up after that first sale? They would be leaving 10’s of thousands of dollars on the table. Are you making this mistake? I know the agent who sold us our first house did send us a thank you card, but that was all. Now, 3 years later we haven’t heard another peep from him. If we go strictly with statistics we will be moving in another 4 years. More likely than not, we will be moving in the next year or two. And we’ve now become friends with someone else that we see and hear from on a regular basis and have begun to send referrals to. We weren’t really friends with our original realtor before, and he hasn’t built a relationship since, so there is no obligation to go with him.
You see the key is to create friendships and how do you do that? Constant communication is essential.
In tomorrow’s post I will tell you how to stay in touch with your clients. There are a lot of different tools and media you can use, and certain ones have more value than others.
