SHow much is a customer worth to your food truck? An important customer performance metric every food truck vendors should know is customer value. Whether you know it or not, your mobile food business spends a lot of money acquiring and retaining new customers. Customer lifetime value (CLV) is be defined as the dollar value of a customer relationship, based on the present value of the projected future cash flows from the customer relationship.
Customer lifetime value is an important concept because you will start to shift your focus from quarterly profits to the long-term health of your customer relationships.
Consider the following customer value facts we’ve gained from internal food truck surveys:
- The average food truck customer spends $7.83 per visit.
- Loyal food truck customers visit a truck 1.9 times per month.
- Loyal food truck customers will visit a food truck for 2.7 years.
Calculating Customer Lifetime Value
Using our industry data, we can now calculate the industry average CLV:
(Average Sale) X (Number of Transactions Per Year) X (Average Retention Time in Months or Years for a Typical Customer)
$7.83 X 22.8 X 2.7 = $482 ($192.81 per year)
So, now take your own data and figure out your truck’s CLV.
Now what? Now you have valuable information to use to determine future marketing plans. You have two options in deciding how much to spend to acquire new food truck customers.
Determine the amount you’re willing to spend per customer per campaign (as long as the cost is less than the profit you make on your first sale.
Determine the cost you’re willing to spend per customer while understanding you’ll take a loss on initial purchases.
Other ways to use this data for would be:
- Share this information with employees so they can make better customer retention decisions.
- Provide examples of the kinds of decisions they can make; refunds, exchanges, upgrades, and more.
- Recognize when employees make good decisions and encourage them to keep it up.
- Teach employees that make a bad decisions, help the employee feel good about trying to make the right decision and confident about what to the next time.
The Bottom Line
In short, you and your staff knowing and understanding the value of your customers makes a lot of business sense. If we could ask anything from you it would be to manage each and every interaction you have with your food truck customers with their lifetime value in mind.
If you have any examples of how calculating the customer lifetime value (CLV) of your customers can help other food trucks tailor their marketing better, or any ideas on how to do it, we would love to hear from you. Share your thoughts on this topic in the comment section, our food truck forum or social media. Facebook | Twitter