When is a $500 return really worth more than $10,000?
Almost every time. That’s the way Chris Zane, owner of Zane’s Cycles in Branford, CT, sees it — and it’s helped him build one of the biggest cycle stores in the country. Zane and his staff don’t have transaction-based relationships with customers.
For Zane, the name of the game is customer lifetime value.
Zane’s Cycles doesn’t have a typical return policy that guarantees a refund or credit for a limited time. Zane’s takes products back at any time for any reason.
Why so lenient? Zane’s done the math: A first-time customer who is happy will likely spend $12,500 over the course their relationship. So taking a return that might not make good short-term business sense almost always makes great long-term business sense.
But it doesn’t end there. Happy customers — people who wanted to return a bike that didn’t fit their needs or a part that didn’t fit their bike — will tell others about the great experience.
So do you know your customers’ lifetime value? Try these:
- Entrepreneur Magazine offers up a simple formula, and
- Harvard Business School Publishing has cooked up a more elaborate one.
