Not all customers are equal. In order to determine both their current value, as well as their potential future value, a variety of analyses are usually carried out on the customer data. These fall into the following categories:

Profitability / Lifetime Value

In assessing the value of customer relationship, the starting point is to determine the profitability of doing business with the customer- using Activity Based costs to calculate the total cost of all interactions with the customer. The monthly figures should be tracked over at least 2 years – as this will take any seasonality factors into account. In some industries, analysis might be more appropriate over 4 or more years.

The strategic value of the customer takes the basic profitability into account, but also factors in whether the customer has a large network that could be influenced by their attitude towards your business.

Householding / Product Portfolio

Most businesses seem to ignore householding data – possibly due to their data being so dirty that they battle to match up people living in the same house. Used properly, it can reveal:

• Gaps in the combined product portfolio,
• Opportunities due to the estimated combined income, and
• marketing opportunities – possibly by soliciting the customers partner to buy a gift for the customer.

Loyalty / Retention

Increasing customer loyalty can have a major impact on the business’ profitability – as it takes far less effort to sell more products to existing customers. Loyal customers also refer their friends to your business – creating a supply of qualified, usually high quality, leads.

Increased loyalty is what many companies looked for when they implemented their CRM systems – but often this was not a realised benefit.

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