January 9, 2020
Adding Client Lifetime Value (LTV) to Your Bottom Line
As a New Year’s resolution, my partner and I decided to eat healthy and started the Ketogenics Diet. We did some research and since both of us are too busy to cook, we planned on either find a food delivery service or hiring a chef to provide meals, at least for the first 90 days. Luckily I came across a blog post that discussed the seven food delivery services that provide keto meals in our city.
Now, all businesses are in business to make money. Something like a food-related service is risky since consumers are fickle, want the latest trends, and there is definitely a lot of operational issues like food spoilage, lost delivery personnel not getting food to clients on time, running out of popular dishes and so much more. Margins have to be pretty high to make it in this business. So I greatly respect anyone crazy enough to start a food delivery service in the first place.
Our experience with our first delivery service was not primarily a keto service but a rice bowl service catering to all sorts of dietary needs from halal, vegetarian, vegan and keto. There was exactly one item on their standard menu that was keto, but they has a “build your own” bowl which allow a user the choice to select all the ingredients to add to the bowl. However, no nutritional information was available and there was no way of knowing the amounts of each item until it arrived so you could individually weigh and calculate the carbs in your bowl. We tried using their service for a week and found that their food, especially the keto-specific items, never seemed fresh so we assumed that the company wasn’t prioritizing on keto and decided to try a different service. For that company, their mistake was that they tried to accommodate the specialized dietary needs of too many niche customers and their food ended up being mediocre.
Restaurants rely heavily on repeat business. Loyal customers that come back every week or months, recommend their establishment to others, bring friends with them on special occasions, hopefully adding new loyal customers as they go.
This is the definition of Client Lifetime Value. It’s not the single meal in the restaurant – it’s the amount of money one customer spends in your restaurant (or any other business) during the life of your business.
The experience during that first meal has to be pleasurable enough to keep them coming back. When dealing with a web-site based food delivery service, it all starts with the web site’s interface. How does the person order their food? What are the options for customizing each item they choose (for example, no tomatoes in their salad). How much description is there about the meal? Is there dietary information? How do they pay for the meals? How easy is it to schedule their orders?
Since our first foray into keto food delivery was mediocre, we decided to try another one. The menu was inviting and they had a variety of menu items listed. It was still limited. There was one photo for each item, and the only way you could learn the list of “featured” ingredients was through clicking the “add to cart” button (not intuitive). They were specifically missing some ingredients such as the oils the items were cooked in. Some menu items had calories/fiber/carbohydrates; others had no information at all.
One of the other issues was that the site required you to purchase “credits” which never evened out to a complete set of meals. There was always some money, but not enough, at the end of the set of credits that was free money to the business, but left a sour taste in the user’s mouth. We decided to try their large package for nine days of dinners and a couple of lunches. On the web site, they said they normally deliver lunch between 11:00 AM and 1:00 PM and dinner between 4:30 and 7:30 PM.
Here again, is where customer lifetime value comes in. You need, as a business, to create a sense of delight in your customer experience. For the first few days, it was okay – a lot of salads with cooked, but cold proteins on top. Again, we looked again at the items and weighed and counted fats and carbs and some of the items were way off the charts to be keto-friendly. Along with the monotony of the menu items, there was distinct inconsistencies in the cooking, and delivery times could be way off. On one weekend, we had our lunch delivered at 2:00 PM and our dinner at 4:00 PM. Another day, our dinner didn’t show up until 8:45 PM. We’re on the final couple of days now. When we called to complain, all we got was an excuse that there were so many orders that day that deliveries were running late. The next day, the final day, they sent an email saying they had run out of a main protein and asked us what we’d like to substitute it with. At this point, we had ordered our menu items over a week ago, so someone didn’t plan ahead. What if I hadn’t been watching my emails? Would they have called or simply substituted something else? We’ll never know.
We just completed an order through another service who’s web site was really beautiful. There were lovely photos of the food, and nutritional information on each item. The proteins were upscale and the menu itself came from a number of different cuisines. This service also sends everything frozen for you to heat up after defrosting, to cook in your oven, steamer or microwave. They even gave us a 5% off voucher for our first order. They only deliver three days a week, but since it’s frozen, that wasn’t an issue.
We plan to make this diet a long term way of eating, so finding a good service was pretty important for us keeping to the plan. Since this is long term for us, this delivery service could get orders from us for the entire year. Our Client lifetime value (LTV) would be extremely high compared to someone who only ordered once or twice.
Customer lifetime value was something I also learned a long time ago, before google existed and Lycos was the #2 search site after Yahoo!. I worked for tripod.com, where people could build their own web sites. I was responsible for building traffic and cross promotion within the network of Lycos sites. I had to import logs into MS-Excel and sort data on the number of visits and page views each of our sites got and realized that just under 90% of our traffic came from just under 5% of users. Their lifetime value was extremely important to the success of the company. If even one of them grew tired of our services and moved their content to geocities or another web hosting company, we’d lose a lot of traffic. This meant coming up with loyalty programs and special services for those in the “webgods” circle including flying them out to visit our offices, custom badges, highlighted at the top of directory pages, special highlights in our weekly emails, and other promotions. It helped us go from 12 million page views a day to 16 million page views a day in nine months.
Customer lifetime value is all about taking the long view on your business. How is your business operating today to increase customer value and ensuring they continue to stay a customer? Do you have systems in place to identify when a client has stopped ordering from you? Do you have loyalty programs to keep them coming back? Do you have emails going out to high volume buyers with special promotions or advance purchasing opportunities before items for sale go public? Consumers like to feel special, important, and valued. You can easily make that happen and when you do it right, your business will grow quickly.