The Value of a Customer

The National Gardening Association’s most recent Gallup Poll shows that the average US household now spends over $530 per year on lawn and garden products. This can range from a bag of grass seed to the power mower used to trim it. According to the 2021 Garden Media Garden Trends Report, American gardeners spent a record $47.8 billion in lawn & garden retail sales.

The study also found that the 35-44 year demographic had the highest mean spending of $608.54. This was highest among all the age groups. In understanding where the money goes we’ll often ask a retail garden center client if they can estimate the value of a customer. In some cases the more sophisticated retailer will employ a Point of Sale (POS) system which can keep elaborate records of specific customer purchases. More often than not though, the response is an educated guess.

In leading our clients to a better understanding we will suggest tracking a couple of key figures. The first is the average transaction (measured in dollars) and the second is an estimate of the average number of visits (per year) of that customer. Again, we are often met with an educated guess. When you put the two together though, you begin to get an idea of the value of a customer.

So what is your average? When we surveyed garden centers we’ve seen average sales as low as $20 to well over $100. Bear in mind that is for the average sale. To calculate your average sale simply divide your daily receipts by the cash register transaction total. For example, let’s say you had a $25,000 Saturday in June. The transaction total would be 500; your average transaction would then be $50.

If we were to survey those 500 customers we might find that they might average returning to that garden center an additional 3 times a year. Some might come more often; some might never return. It is, after all, an average. When you do the math our average customer might visit 4 times at an average of $50 per visit. Their annual value would be $200.

Getting back to that National Gardening Association Survey we come to realize that our customer is spending less than 40% of their discretionary lawn and garden purchases at our business. Out of an average of $530 we’ve captured only $200. We’ve got some work to do!

The first step is actually getting our hands around our customer base – particularly all those new Covid customers! In the face of increased competition with box stores and online retailers, the business owner with the best relationship will win. The name of the game is to become the “top of mind” choice for that customer whenever they think of lawn and garden. Capturing contact information for each and every customer should be your first order of business. Better yet, provide a clear and obvious benefit to volunteer that information and you will realize a much greater rate of response on future marketing efforts. Why? They want to hear from you. They’ve given you permission.

Concentrating on building your business through increased “customer share” is a great way to increase sales without increasing your overhead. As part of an overall media mix, a customer loyalty app is an effective way to put your message front and center where they live – their smartphones! Backed up with a solid strategy that creates increased average sales and more frequent visits will equal a better bottom line.

Let’s go back to our sample garden center and project sales with a couple of fundamental adjustments. In addressing our Saturday in June, let’s assume we increased the average sale by only $5 to those 500 customers. Our net would be an increase in that day’s sales by 10%. But couple that with a marketing campaign that realized an additional visit (from 4 visits to 5) and you’ve sold that average household $275 – an increase 37.5%. Get the picture?

A focused effort on maximizing the value of an existing customer base can pay big dividends in the form of healthier margins, while avoiding the bloat that can occur when opting for larger and larger facilities. The result: a solid business that has a plan for increasing sales and profits. For more information on putting a customer loyalty app to work for your business – check out our mobile app platform.