Lifetime Value of Clients--
More Than One Commission
Clients have a lifetime value. This value is the contribution they make over the lifetime of your business.
Repeat Business & Referrals
At some point, buyers will become sellers. And sellers often have other properties they would like to sell. Regardless of whether they are buyers or sellers, new clients can become repeat clients. In every business, including real estate,
referrals
represent the most significant source of new business. The best referrals come from
satisfied clients
– they speak from experience. Repeat clients, and the new clients that they refer to you, represent a very substantial amount of potential revenue.
The Value of New Clients
There’s no question that new clients are important. You need a constant
flow of new clients
to replace those whose transactions have closed. New clients are the lifeblood of your business. To illustrate how this works in practice, assume that one client represents a potential of 20 future real estate transactions. For purposes of this illustration assume that 5 of these transactions are repeat business, in which the client buys or sells other properties. The remaining 15 transactions are referrals of new clients. Also assume that on average, your share of each commission is $6000. Your potential future income from one client including future repeat business and referrals is at least $120,000. However, since each of the 15 referred clients also represents another 20 future real estate transactions, your potential future income could be $2.4 million. Not a bad return from satisfying and keeping in touch with one client.
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The Impact on Your Business
It is impossible to over-emphasize the importance of the concept of lifetime value. It influences every aspect of client interactions.
Prospecting
is the process of generating leads. Some of these leads will become new clients.
Priming the Pipeline
New clients prime
your client pipeline.
As these clients flow through the pipeline, their value increases. Provided that you
satisfy new clients,
they will hire you again and also
refer others
to you. As a result, leads represent more than just new clients for the next transaction.
They start the flow of a permanent pipeline of prospects.
This means that your prospecting is not just about finding new leads. It is about working on a lifetime flow of prospects and clients.
Investing in Your Client Pipleline
From a very narrow perspective,
good client service
helps reduce the frustration and hassles in an individual transaction. However, from the broader perspective of the lifetime of your business, your great service is what clients will remember long after their deals have closed. It’s your service that will encourage past clients to hire you again. It’s also what prompts them to recommend you to others. In effect,
quality client service is your investment in the lifetime value of clients.
It’s the driving force of your client pipeline. Good client service generates the momentum that keeps your pipeline flowing and your business growing. It also helps increase the long term value of your clients. The more you satisfy them, the more new and referral business they will generate for you.
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Increasing The Value
Repeat business and referrals are key element of lifetime value. They are also more than single transactions. They are additions to clients' value. Realistically, repeat business and referrals from satisfying clients, doesn’t just happen. By systematically
keeping in touch with clients,
you can stimulate repeat business. And by knowing how and when to
ask for referrals,
you can increase your new business by
attracting more clients.
Whatever resources you put into developing and maintaining referral systems are investments in the lifetime value of clients. In fact, whatever resources you use to generate leads and satisfy clients are similar investments. There is a very easy way to optimize these investments. Simply ensure that each and every interaction with prospects and clients makes a positive contribution to your pipeline.
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