'Lifetime Value vs. Transactional'

Credit: Bill Gillespie

I spent a recent Saturday with two career long pals. We've known each other since the the mid-80s and have worked together across the years and dozens of employers. It would be impossible to recall or share the many business miracles and stories we've been part of together.

The guy on the left is Tom Gonzalez. He's an internationally known illustrator. Most of you have held a package in your hands that he designed. He's insanely talented.

The dude in the center is Jim Grannan. Jim is the CMO of Hawaii Sea Spirits on Maui. He's without a doubt the most creative and absurdly funny person I know. If you're with Jim you're going to hear great ideas and laugh while doing so.

I met both of these guys at The Coca Cola Company early in my sales career. You can find both of them on LinkedIn.

Spending time with these guys caused me to ponder, do you know the lifetime value of a client? Do you think about the relationship this way or are you more transactional? Have you done the math to determine the full scope of opportunity that exists with the people you do business with?

Owners, do you do that with sales reps? Do you consider their likely lifetime contribution or is it what their balance sheet looks like today in isolation? If you do consider their long term value it's sure to influence the picture. What is a rep worth that struggles through the first two years but hits numbers for the next 10 or 20?

Years ago I worked beside two reps. Their volume was similar. Both were well ahead of me. I was just getting started and these guys were living what, to me, looked like the good life. On the surface they seemed the same.

When you looked closely, however, you could see differences. One was very transactional. Every project was a contest. Each proposal was a debate. Giving in on even the slightest detail was a loss.

The other was big picture. He worked hard to make projects profitable but his focus was on the relationship. He saw every conversation as a chance to improve the partnership.

See if you can match the outcome to the rep.

One turned over his account list continuously. It was hard to find anyone that had worked with him for 30 months. He was always replacing and rebuilding.

The other boasted relationships that were years old. His gross profit and his earnings were well ahead of his coworker. While top line sales looked similar, everything else was different. Over time this guy doubled and tripled his numbers.

Long term relationships make everything easier. Problems are easier to overcome. Budgets seem to get managed. Sales are easier to predict. Collections are easier.

For me, the long term value was evident. I didn't want to turn over my list. Plus, the friends I made are precious.

Obvious? You’d think so but I take calls every week from short term thinkers.

There is an old business question I've heard employers ask. "Does the guy have 40 years of experience or 1 year of experience 40 times?"

My experience has been that transactional focused people (reps, owners, buyers) fall into the latter group.