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April 27, 2017

What’s A Customer Worth?

If I asked a bunch of retailers what they consider to be their most expensive asset, many would answer their inventory, as it’s the largest balance sheet asset. Some might answer it’s the value of their real estate, their location or their investment in staff and training, while others would consider their sterling reputation their most important asset. These are all good answers, but in reality the most valuable asset a business has is one that isn’t even listed on the balance sheet: their individual customer.

Customers drive sales, which represent the top line of the profit-and-loss (P&L) statement. Not only do your customers represent present and future sales, they are, hopefully, a walking, talking endorsement of your store and freely encourage others to buy from you.

Your customer base, central to your success, is also a fragile and perishable asset.

Despite all the potential they represent, retailers perpetually do things (or don’t do things) that serve to erode consumer loyalty. In many cases, stores do things that permanently drive customers away, and that’s a scenario for disaster because those same customers will, often for many years, tell their friends about their bad experience and vowing never again to shop there. The cost in lost sales and damaged reputation is huge.

Does This Sound Like You?

Let’s talk about how you might be driving away your customers. In my experience, the top reasons customers leave are staff indifference, non-competitive prices, failure to match a competitor’s prices, poor return policies, lack of product selection, failure to resolve consumer complaints, stock-outs on advertised products and the perception that the retailer views the consumers as a commodity rather than a treasured asset.

All of these are a bad way to do business, but the most aggravating retail transgression of all for a merchant to commit is to address customer complaints by stating, “It is our policy … ” as a reason to not accommodate the consumer. Such policies are most likely in direct conflict with the common customer policy of dealing only with retailers who are willing to satisfy a problem regardless of where the fault lies.

Take a step back now and think, how many customers haven’t you seen in a while, maybe for months, whom you used to see on a regular basis? Do you have new customers come in never to return? Are you regularly losing sales because your customers are saying they can get the same item from the store across town cheaper? If you’re saying yes to any of these, it’s time you put yourself in the shoes of your customer, and it’s time to make a change.

Add Up the Numbers

One’s appreciation of the customer is heightened if you can estimate the dollar value of each consumer over the average lifetime of your consumers. No, that doesn’t contradict what I said about not treating customers like a commodity, but crunching the numbers can easily drive home the impact each customer has on your bottom line.

Begin by determining the total customers who have. (If you don’t have that number then shame on you.) Your active customer email list is a good start. Your 4473 submissions are another good source, and it’s possible your store’s POS system captures this kind of information through daily or weekly customer transaction counts and the average value of those transactions.

Next, build several theoretical customer-purchasing profiles. For example, let’s assume a customer who is age 30 might be a customer for 20 years. If this customer buys at least one gun every four years at an average price of $700, that’s $3,500, and that’s before all the ammo, accessories, apparel, licenses, shooting courses, range fees, etc. With enough profiles, you can then estimate the lifetime value of many of your customers. Are they each worth $3,000, $10,000, $25,000, $50,000 or higher? Let’s say the average consumer for our industry, over a 20-year period, will spend $10,000 to $25,000. If you lose 100 customers over 20 years, that amount to lost sales of $1,000,000 to $2,500,000. Ouch!

Remember, it is much cheaper to keep an existing customer versus trying to gain a new customer — and far less work than trying to woo back customers who’ve had a bad experience or convince the people they’ve told about it that they ought to give you a try. It is in your best interests to honor your most valuable asset and keep them returning again and again.

You might also like: Building on the Customers You Have


Robbie Brown has an extensive background in retailing, wholesaling, distribution service industries and consulting.  He has been CEO of numerous companies in the shooting sports industry, including several retail chains and distribution companies. Brown consults for businesses of all sizes in both the merchandise and service industries, as well as for a variety of corporations, industry groups and trade associations. He is a frequent round-table moderator and speaker before industry trade shows, conventions and other corporate groups, and he has published more than 300 business-related articles in various trade magazines, delivered hundreds of speeches and served as a business advisor to many CEOs both inside and outside of the firearms industry.

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Tags: business customer service FFL firearms retailer Gun Store Retail

Categories: BP Item, Retailers