Two personal, and comparable, experiences recently showed directly how customer service impacts lifetime value. As many of you know, I travel frequently on business and rent a car about 40 weeks per year, making me a “whale” to car rental companies. I am also relatively loyal to companies, I limit my choices to two companies and probably use my favorite 75 percent of the time.
The Ace Rent-A-Car story
A few months ago, I rented a car from ACE Rent-A-Car. I had rented from Ace about 15 times already in 2014, for 30+ weeks, from its Chicago location.
After going out for dinner one night, I discovered that my rental car had a flat tire. Unfortunately, the car I rented did not have a spare tire (yes, there are cars now that are sold without a spare). It was about midnight in Chicago and it was cold so I called Ace with my problem even though I had waived roadside assistance. The first two times I called I was placed on hold 5-10 minutes and the person had no idea how to help. The third time I called they were friendly but explained they could not help because they were acquired by Budget Rent-A-Car (still not sure if it was a system-wide acquisition or the O’Hare location) and gave me a phone number for Budget. I was annoyed as it was getting quite late and I did not feel it was appropriate to rent cars that did not have a spare (and not let the customer know).
Anyway, I called Budget and spent about 30 minutes on the phone as they tried to identify the car (my ACE number was not yet in their system). Eventually, they said they would send help. About 20 minutes went by and I was about to call again when I got a call that they could not help because the acquisition was still in progress and I had not elected roadside assistance. At that point I called back the ACE location and told them that if they did not help, I would just leave their car in the city. They eventually gave me the phone number to call a tow truck to have it towed to their offices. (which took another 90 minutes). That was the last time I ever rented from Ace and Budget, and last time I ever will.
The Enterprise Rent-A-Car story
I recently had a customer service experience with Enterprise Rent-A-Car that had a very different outcome (as I said, I rent cars frequently). I recently rented a car on a Sunday evening and that Monday morning the car was dead. I believe I left the lights on overnight (I am used to auto-off lights) but am not sure of the cause. Unfortunately, the car had keyless entry and no way to unlock the door if the car is dead (note to Volkswagen: Stupid idea). I had also elected not to pay for roadside assistance.
So I called the Enterprise location that I had rented from and explained the situation. I confirmed I did not purchase roadside assistance but would pay for help. Without any hassle, they sent a tow truck with a replacement vehicle. No fuss, no muss. When I turned in the car, I noticed they did not charge for the tow or service.
The end result
Since the Ace incident, I have spent about $3,000 with Enterprise. After the most recent incident, I have already booked another $5,000 in rentals. It is safe to say that I will spend at least another $10,000-$20,000 with Enterprise in my lifetime and zero with Ace or Budget. Thus, Ace changed a customer with an expected lifetime value (which they could have calculated based on my previous spend) of about $25,000 to $50,000 (what I already spent). Conversely, Enterprise took a customer with a $10,000 lifetime value (assuming I split my future spend with them and one other vendor) to over $20,000 LTV. This impact on LTV is directly tied to their customer service experience.
These two experiences show the impact customer service can have on LTV of any business. A good experience is worth much more than the cost to the vendor while a bad experience can be extremely costly. While hard to measure (I am sure Ace can’t track what the experience cost them), customer service has a huge impact on LTV.
- A bad customer service experience can end your relationship with your customer, truncating the customers lifetime value.
- A good customer service experience can make your customer more loyal, doubling the customer’s LTV or more.
- While hard to measure, customer service is a powerful lever to impact lifetime value.