The Finials…Finally, or Lifetime Customer Value Keeps Adding Up
Recently we purchased a bed for our son from a popular online furniture store. Once the bed shipped, the delivery people arrived with the bed, went to set it up–but the hardware was no where to be found.
They called the warehouse and the company was going to ship it directly to us. Then they wanted to schedule a follow-up so that the delivery team could assemble the furniture as an included part of the service. At this point we declined. We could tell it would be faster to set it up ourselves.
Several days later we received the hardware and began the assembly process. The final step is to put the finials on the bedposts. Well two of the four finials were scratched up.
We got customer service on the phone and let them know about the problem. They (again) promised to ship the pieces.
Days later we received the replacement pieces and…they were the wrong color!
Phone call to customer service…again.
Reshipping pieces…again.
That was the last time that they had to ship everything, but our order process lasted several weeks longer than it should have based on all of their mix-ups.
In talking to customer service the final time, they refunded the original shipping cost, approximately $250. Now, I tell you this story, not to complain about our shipping problems (we’ve dealt with this company before and felt that this was a rare situation), but in a roundabout way to illustrate the flexibility that they have based on understanding Customer Lifetime Value (CLV).
This was not our first furniture purchase (nor our last with this company), plus they can safely assume that we will refer other families. This is the magic–we are worth far more than the net of our transaction.(In all probability, their average customer is worth more than we are based on average transaction value and number of purchases.)
But, you should note that we have multiplied our value a couple times based purely on our purchases and a couple of times based on the value of any referrals we make.
So…while they have a problem that they must solve in terms of fulfillment, they still are in the black and will not take a hit from absorbing multiple shipping charges (both ways for several of the finials).
Another result of understanding their customer’s lifetime value gives them the flexibility to truly enable customer service to take the appropriate action. Had our CLV been markedly lower than the refunded shipping cost, this transaction would have been a wash, and that offering would probably not be on the table.
I hate to feel like test subjects, but hopefully they are tracking the numbers.
What a great article. I am amazed at how few retailers truly understand the idea of CLV. I have just ordered a book called “The Ultimate Question: Driving Good Profits and True Growth” where the author ties to quantify customer satisfaction in dollar terms. Will let you know if it lives up to my expectations!
Thanks! I’ll have to check out that book. In another life I was at a large company that went through the yearly customer satisfaction ratings (as most bloated tech companies do) and was aiming for the day when that number could go above 70%. Now the only dollars that were tied to that number were the bonuses that would kick-in for the VP. BUT, we had no idea what our online experience (and that satisfaction number) did for any increase to the bottom line.