Hudson Jewelers is working on creating "value of a loyal customer studies" for several of their top clients.Mrs. Elizabeth Vanburen is one such customer. She visits Hudson's Naples, Florida store to buy diamonds every February, and buys jewelry for her extended family every other year.

We have calculated the following:

• • Customer retention rate = 80 percent
  • Contribution margin = 0.55
  • Price per purchase = $200,000

From this information we see that

• • Repurchase frequency = 0.5 (every other year is her biggest purchases)
  • Customer defection rate = 1 - retention rate = 1 - 0.8 = 0.2
  • Buyer's life cycle = 1/defection rate = 1/0.2 = 5 years

So, the calculated Value of this Loyal Customer = $200,000 x 0.55 x 0.5 x 5 = $275,000

This means Mrs. Vanburen over her average buying life is conservatively worth $275,000 to us in revenue. We definitely want to treat her well and keep her coming back to our store.

• How would you intentionally plan to make Mrs. Vanburen's (and other valued customers) shopping experience there exceptional? (Feel free to be creative in your response).
• How might your training of your store employees include awareness of customers such as Mrs. Vanburen and the need for top notch service to retain her? If we know Mrs. Vanburen loves to design her own jewelry gifts with our salespeople using our in-store software based/CAD solution, how might you incorporate that desire in the plan?