In 1987 Chris Zane, a small bike shop owner in Connecticut pissed off his competitors. Zane decided to offer his customers free lifetime service on all bike’s he sold.

“Free service for as long as you own the bike is ludicrous,” said John Budd, general manager of Action Sports. “But we’ve matched Zane tooth and nail.”

His shop now offers lifetime free service, as do most other bike retailers in Zane’s market. Many feel they have no choice, and they’re resentful that Zane forced their hands. Zane has since offered his customers many more perks, including free parts, in-store coffee bar, price guarantees, etc.

In 2011, Zanes Bikes had revenue of $20 million. Zane doesn’t worry about the cost of offering increasingly more perks to his customer because he has figured out the lifetime value of a customer.

He writes, “my average customer will spend $12,500 on my products and services over his or her lifetime, $5,000 of which is profit. Of course the only chance I have of ever seeing that kind of return on the relationship is if that customer keeps coming back and back again. Better yet I want customers to  come back with their kids, their relatives and five friends.”

When you start looking at the lifetime value of a customer, you start making decisions that piss off your customers and yet increase your profits. RewardCamp helps you to figure out the lifetime value of your customers. And it takes it one step further – it shows you the value of the customer, based on customer segments – the value of customers who buy twice, the value of customers who buy three times and so on.

Here is the avg. value of customers of one retailer:

Value of customers who order once – $68
Value of customers who order twice – $124
Value of customers who order thrice or more – $329

That’s just the start. RewardCamp then provides a ‘set it and forget it’ method for you to convert new customers into repeat buyers.

Sign up for a free trial of RewardCamp to learn and increase the lifetime value of your customers.

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