Post-Sales Support

Post-Sale Support – Good news or bad?

Some business owners professional associations wrongly take a defensive posture toward servicing a client after the sale. They seem to think that a customer problem after delivery or during the warranty is a threat and nothing but a headache that will eradicate whatever profits they made from the sale in the first place. They couldn’t be more wrong; it’s actually an opportunity. Enlightened business owners know that post-sale support and how its handled has a large effect on the lifetime value of a client.

Understanding ‘lifetime value’

The lifetime value of a client is the total number of sales a typical client will make with your firm over the typical life of the relationship. Lifetime value is a way of looking at customers in the long term for all the sales you will make to them in the future, not just the current sale.

Case 1: Hearing Aid sales.

For example, someone that buys a hearing aid will typically replace their hearing aids every 3-4 years. A typical hearing aid will cost $800 and most clients will get two. Assuming that most clients don’t get a hearing aid until they are 60 years old, a typical client will get 4-5 pairs of hearing aids between age 60 and the end of their lifespan. That means that a typical hearing aid client will have a lifetime value of between $6400 (4 pairs x $800 each x 2 hearing aids) and $9000. Providing poor service after providing the first pair would be like leaving $4800 to $6400 of sales on the table!

Case 2: Catalog sales.

In the late 1990’s a major catalog merchant set out to measure the effect of post-sale support on the lifetime value of their customers. At the time, they had a very aggressive warranty. Essentially it said “if at any time you are not completely satisfied with the products you have purchased from us, we will replace the product free of charge or refund your money.” Some people thought they were crazy to have a warranty like that.

But they measured the lifetime value of every customer that ever had a problem with the goods they were sold. What they found, was that for those customers whose problems were resolved promptly, the lifetime value of the customer tripled! What seems like a crazy warranty policy was actually very good business.

Lifetime value vs. cost of conversion.

In both these cases the businesses involved knew that getting a new customer was a lot more expensive than making a new sale to an existing customer. Knowing this, both other these professional associations paid close attention to the post-sale support of their clients.