I haven’t purchased fuel from Exxon since 1989.
30 years ago yesterday, an oil tanker owned by Exxon, the Exxon Valdez, spilled roughly 11 million gallons of oil off the coast of Alaska, destroying 1,300 miles of shoreline habitat, and changing the face of Alaska’s coast forever.
When it was discovered that Exxon’s negligence in maintaining navigation devices and providing sufficient crew for the vessel was the cause of the collision and subsequent spill, I stopped buying fuel from Exxon.
Let’s consider what that means in lost revenue.
- The average US driver puts in about 13,000 miles per year, according to the US Department of Transportation. (Yes, I’m rounding to make the math easy.)
- According to data from the US Energy Administration, the average price of all grades of gasoline from 1989 to 2017 was approximately $2.04.
- The average fuel economy of all light-duty vehicles was 20.4 mpg between 1990 and 2016.
So if the average driver drives 13,000 miles per year at 20 mpg (did I mention rounding for easy math?), they use 650 gallons of gas per year. At two bucks per gallon, that’s $1,300 dollars per year. Multiply that by 30 years, and I’ve cost Exxon a potential $39,000 – essentially the customer lifetime value of the average driver over a 30-year period.
Which means that while my boycott has been personally satisfying, it probably doesn’t mean much to Exxon, who grossed $237 billion last year alone. To cancel out just last year’s revenue, six million people would have to have boycotted Exxon for 30 years.
What does this mean to you? Well, if you’re a marketer, knowing your customer’s lifetime value can help you determine the value of something like a boycott – and how seriously you should take it. It also shows that this data is pretty easy to come by, even without internal access to sales data. If you have your own sales data, it should be even easier. Figure out your average purchase value, multiply it by the average purchase frequency rate, and then multiply by your average customer lifespan.
Customer lifetime value = avg purchase value * avg purchase frequency * avg customer lifespan Share on XBy the way, unless you truly have customers for life, average customer lifespan isn’t birth to death. Average customer lifespan is the span between becoming your customer, and when they stop purchasing from you. For something like gasoline, it can be a long period of time, from teen years through senior citizen. For other items or classes of item, that span could be much shorter. Children’s clothing, for instance, would likely be from the birth of a child through their teen years.
That brings me to another way in which you can influence profitability – by increasing the lifespan of your customer. A small percentage increase in customer loyalty may be less expensive to create than the cost of new customer acquisition.