 Charter operators accumulate an enormous amount of data. You have data in your flight management software, in your accounting programs, and in your log books. There's important information in cell phones, your PDA, and in your email program. And hidden somewhere within all that stuff is the most important marketing fact you need to grow your charter business, especially in tough times.
The Average Lifetime Value of Your Client
The most important marketing fact you need to have at your fingertips is the average lifetime value of your typical retail charter client. Here is how you calculate it.
Your typical client, receiving your routine service, takes "n" number of trips per year, generating average trip revenue of "x" dollars per trip; and tends to stay active with you for "y" years.
For example, you might have a King Air 200 in your fleet. Your average retail King Air client might take three trips per year, paying average flight charges of $4,000 per trip, and stay with you about five years. The average lifetime value of that client would be $60,000.
Perhaps you have a Citation II on your certificate. An average client might use it four times each year, spending $7,500 each trip, and stay with you three years. The average lifetime value of your light jet clients would be $90,000.
In both examples, I used the gross flight charges. You should also look at your operating margins. Let's assume that 85% of the flight charges went to the owner, and your operating margin was 15%. In the case of the King Air, your operating margin would be $9,000 and the Citation II would be $13,500.
Here's Why It Matters
If you know what a new client is worth to your business, you can make an intelligent decision about how much you're willing to spend to get a new client and to keep the client happy!
When you bring in a new client, you aren't bringing in just one trip. You're adding a relationship that represents an annuity stream. Using the Citation II client, the first trip isn't just $7,500 gross or $1,125 on the margin. It's a $90,000 cash in-flow annuity or a $13,500 future profit stream!
Here's What to Do with It
In the July 2008 Charter Marketing Survival Bulletin, we discussed three ways to grow your business. What you need to do with the average lifetime value is to combine it with those three ways: increase the number of clients; increase the frequency of trips; or increase the average revenue per trip.
Increase the number of clients by adding new ones, through your marketing and sales efforts, and by keeping your current ones flying with you. If you know your light jet client stays active with you for three years, you can make an intelligent decision about how much to invest in client retention programs to extend that average life from three years to four years.
Increasing the frequency of trips would have a dramatic impact on the average lifetime value. An investment in client information marketing would give your clients more reasons to use your services.
Increase the average revenue by making a small investment in sales skills training and a definite sales process. That could get you longer (and more profitable) trips merely by suggesting stops along the way when the client is scheduling the trip.
Use This Information with the Owners
You should track the average lifetime value by type of aircraft in your fleet. Assuming your clients tend to use the same type of aircraft for most of their trips, you can determine the value of a new mid-jet customer from a light jet customer, for example.
This can be very useful information when considering adding aircraft to your certificate, and when negotiating terms with your owners.
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