Is my Steak Ready ?

Subjects: Residual Value of a Customer
Principle: Cost of losing a customer, Critical Interaction Moments (CIM)
Potential Worth: 1,000$ of lost profit per customer lost

Yesterday evening we went out for dinner: we decided to give a shot to a new steakhouse, where I could enjoy our position on top of the food chain and honor in the best way a great New York Strip.

After sitting and ordering, my steak arrives, and it’s lukewarm, not sizzling the way I like it. I tell it to the waitress: she takes my steak away and come back couple of minutes later with the same steak still tepid. She asks me “Is the steak way better now?” I reply with an unconvinced “Hmm, ok…”. And she leaves. And I mentally leave that place for ever. Amen.

I am intrigued by the Critical Interaction Moments (CIM) in a transaction. These are the moments in which the relationship between a person and a business can move to the next level of mutual trust. And when the customer has a problem, it surely is a CIM.

The waiter did not replace my steak: great, she saved money for the company. Well, in reality, there is a cost associated with that. Because I was not fully satisfied, now I will not go back there anymore. Let’s run some basic math

2 person party x 2 times a month x 3 years I live in a place = 144 dinners served that the restaurant will not get from me. If they make, say, 7 dollars of profit on each dinner, we are talking about 144 x 7 = 1,008$ of future profit that went in smoke.

Replacing the steak and make me a life-time customer would have costed probably 5$...

Hey, invest 5$ to get 1,008$: I am down for that kind of investment...

We just briefly analyzed the Residual Value of a Customer: few companies think in terms of future revenues potentially lost when they deal with problems. If they did think about those future dollars, I guarantee our complains would be addressed much faster.

But the reality is that a short-term view of the commercial transaction (“How many dollars can I get now? Is it worth to replace that item?”) prevails in the majority of cases, and this makes people shop around and leave a business…

My dream is a lifetime relationship with a customer: the cost of acquiring a customer is so high today that it makes sense to go almost to any extent to keep them from going away. And on top of that, it is a great satisfaction to deal with a circle of customers that now become your fans.

And remember, "You don't sell the steak. You sell the sizzle."

K in USA