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.
This section of the site has articles in the following sub categories:
