How Much Is Boneless Chicken Worth?

The recent theme of these columns has been on customer experience management and loyalty. Thinking about these things like I do makes you a watchdog for bad customer experiences that kill loyalty. Life’s lessons pop up anywhere.

I recently witnessed a great retailer lesson at my local food grocery store. The woman in front of me had a very large order (sigh!), and was telling the cashier about a dinner party she was hosting that evening. It was apparent the customer was in a hurry, and frustrated she hadn’t been able to get the boneless chicken she needed for the main course. The cashier was surprised and said: “But we sell boneless chicken.” “Yes I know,” the customer replied, “but the butcher said you are out, so I’ll have to pick it up somewhere else.” You could tell she was annoyed as she left to find the chicken she needed at another store.

As I listened to this I thought, “Chicken, butcher, knife. How can they ever be out of boneless chicken?” So the question is: “How much is boneless chicken?” This customer was seriously inconvenienced by the store,  and is on her way to shop at a competitor. Consider the typical numbers for such a scenario. The woman spends $175 per week on food, and would normally shop at this store for another seven years. The store has a gross margin of 4% on food. The Lifetime Value (LTV) of this customer is the profit she represents to the store over her purchasing life. A reasonable estimate is $2,550. This is calculated by average sales times number of purchases per year times years as customer times gross margin.

For the lady needing the boneless chicken, the butcher’s indifference may have been the last straw in a series of missteps that cause her to shop elsewhere. Boneless chicken actually costs more than you think. In this case, it’s worth $2,550 in lost profit from a single customer over the next seven years. It is well known that unhappy customers tell their problems to other customers, creating immense negative word of mouth. So defecting customers cost more than you might think. Imagine the impact from more customers defecting due to poor performance at other points of contact with the store.

Levels Of Spending

The concept of customer Lifetime Value is even more critical in agriculture where the customer base is shrinking, and the spending differences between Gold, Silver, and Bronze customers is large. One of our Midwest customers has average annual sales to his grower segments as follows: Gold $139,535; Silver $64,183; and Bronze $5,747. Let’s look at a potential Lifetime Value of a Silver customer for this retailer.

AgKnowlogy has the purchase history of over 150,000 customers and 200 retailers in our database. The loyalty of these customers is 74%, which translates into an average customer lifespan for all customers of four years. Silver customers account for 30% of your sales and roughly 15% of your customers. Since they are generally high quality, I stretched the life expectancy in our example to 12 years. I also assumed the customer brings the retailer just one new customer as a referral, and that new customer only purchases at 50% of existing customers I used a margin of 15% across all purchases for this example. This single Silver customer is worth almost $158,000 in profit during the time he is a customer.

Given the trend of grower consolidation, not enough retailers think strategically about customer loyalty. If the Lifetime Value of one Silver customer can easily be worth the profit in our example, retailers must diligently protect this LTV. Paying close attention to customer experiences at every point of the customer corridor is one of the most important tasks you have. Profit from customer retention drops directly to the bottom line.

Back to boneless chicken. I don’t know if the butcher and the cashier would have let the frustrated customer walk out unsatisfied if they understood her Lifetime Value. I would like to think not. Now think about your business. Can you and your staff readily identify the long-term value of your Gold and Silver customers? Is every contact your business has with customers underpinned by the actionable knowledge of their Lifetime Value?

Leave a Reply

Management Stories

Stewardship video screenshot
ManagementNew Video Raises Awareness of 2,4-D Stewardship
April 24, 2017
A new public service video developed and produced by the 2,4-D Research Task Force, in conjunction with the American Soybean Read More
ManagementAn Inside Look at Award Winning Ag Retailer Gar Tootelian
April 20, 2017
CropLife Editor Eric Sfiligoj discusses An Inside Look at Award Winning Ag Retailer Gar Tootelian Read More
Crop InputsFBN Publishes ‘Voice of the Farmer’ Agriculture State of the Industry Style Report
April 17, 2017
Farmer’s Business Network (FBN) released today its “The Voice of the Farmer”, which the company is describing as “a special Read More
ManagementTalking Responsible Ag
April 13, 2017
CropLife Editor Eric Sfiligoj discusses the Responsible Ag program with director Bill Qualls. Read More
Trending Articles
Crop InputsFlying Under the Radar No More, FMC Goes Big
April 13, 2017
Describing FMC as “under the radar,” admittedly, is probably a stretch. But in a snap of the fingers, FMC upped Read More
Young Corn Plants
Crop NutritionStill Hunting Yields
April 1, 2017
There’s no denying it — the agricultural marketplace today is undergoing a fundamental shift in fortunes. Not too many years Read More
Nutrients for Life Foundation Teacher
FertilizerNutrients For Life Foundation Celebrates 10 Years Teaching Fertilizer Education
March 23, 2017
Those in agriculture know fertilizer is a vital ingredient to grow strong, productive crops. In fact, fertilizer is responsible for Read More
AdjuvantsA New Weed-Control Era Begins: But First, One Last Obstacle
March 4, 2017
There is trepidation, there is reluctance, and there is excitement. Ag retailers feel it all about the new dicamba and Read More
LIFT Academy video screenshot
Crop InputsLIFT Agriculture Academy: A Q&A With West Central Distribution’s Dean Hendrickson
March 1, 2017
West Central Distribution recently launched its LIFT Agriculture Academy, a new, premiere training and professional development resource for West Central’s ag Read More
Farmer and aptop
Matt Hopkins10 Warning Signs Your Website Is Grossly Outdated
February 8, 2017
Your Website is often a visitor’s first impression of your ag retail business. A positive first impression can set the Read More
Latest News
BPIA logo
Seed/BiotechBPIA Files Comments with USDA
April 24, 2017
The Biological Products Industry Alliance (BPIA) has filed comments with the USDA’s Animal and Plant Health Inspection Service (APHIS) Plant Read More
Eric SfiligojHope for Application Equipment Sales
April 24, 2017
The old saying goes that a “rising tide lifts all boats.” If this is indeed the case, then things may Read More
Stewardship video screenshot
ManagementNew Video Raises Awareness of 2,4-D Stewardship
April 24, 2017
A new public service video developed and produced by the 2,4-D Research Task Force, in conjunction with the American Soybean Read More
ManagementAn Inside Look at Award Winning Ag Retailer Gar Tooteli…
April 20, 2017
CropLife Editor Eric Sfiligoj discusses An Inside Look at Award Winning Ag Retailer Gar Tootelian Read More
Students Soybean Field
Industry NewsMACA Announces 2017 Young Leader Scholarship Recipients
April 19, 2017
The Mid America CropLife Association (MACA) Board of Directors selected 11 college students to receive the MACA Young Leader Scholarship Read More
Growmark FS Outlet
SoftwareKnoa Software Solution Helps GROWMARK Boost System Perf…
April 19, 2017
Knoa Software, a leading provider of user experience management (UEM) software, has announced that GROWMARK, Inc., a regional agricultural cooperative Read More
Crop InputsFBN Publishes ‘Voice of the Farmer’ Agricul…
April 17, 2017
Farmer’s Business Network (FBN) released today its “The Voice of the Farmer”, which the company is describing as “a special Read More
ManagementTalking Responsible Ag
April 13, 2017
CropLife Editor Eric Sfiligoj discusses the Responsible Ag program with director Bill Qualls. Read More
Crop InputsFlying Under the Radar No More, FMC Goes Big
April 13, 2017
Describing FMC as “under the radar,” admittedly, is probably a stretch. But in a snap of the fingers, FMC upped Read More
Crop InputsWhat do Roundup and Mickey Mouse Have in Common? Califo…
April 13, 2017
(SOURCE: East Valley Times) Glyphosate, the active ingredient in Monsanto Co.’s Roundup and many other weed killers, is being added Read More
Syngenta headquarters in Basel, Switzerland
Crop InputsSource: ChemChina to Divest Assets to Adama Following S…
April 11, 2017
China National Chemical Corp. plans to redistribute agrochemical assets to its Adama unit after the $43 billion takeover of Syngenta Read More
Farming drone air
Eric SfiligojThe Interest in UAVs for Agriculture Grows
April 10, 2017
At times, it seems as if experts have been predicting “big things” for unmanned aerial vehicles (UAVs) for several years Read More
OpinionOpinion: Taking On The Farmers Business Network
April 8, 2017
Well, another round of venture capital funding has come to Farmers Business Network (FBN), followed up with the obligatory feature Read More
Drone
EquipmentFarming Drones: The Future Of Agriculture?
April 7, 2017
Chances are, you already know drones are amazing. After all, this is something DroneLife readers just understand. But if you’re Read More
ManagementFMC-DuPont, Crop Plantings, and UAV Updates
April 6, 2017
Editors Eric Sfiligoj and Jackie Pucci discuss the purchase agreement between DuPont and FMC, the 2017 crop acreage mix and Read More
Falcon soil sampler
EquipmentSerious Soil Sampling Rigs
April 6, 2017
The industry has seen an increase in automation in sampling equipment, and consultants now often pull cores with an automated Read More
Iowa waterways
FertilizerDow AgroSciences Recognizes Ag Retailers’ Role in Prote…
April 6, 2017
The state of Iowa and its agriculture community have worked for decades to preserve soil health, protect water quality and Read More
Farmer Scouting Weeds in Soybean Field
EquipmentSoil, Scouting Programs Continue To Gain Value
April 5, 2017
How much growers and their retailers utilize soil testing and scouting varies greatly. But they should step up their game Read More