The focus on customer relationship management has become central to all organisations. Companies have increasingly recognised the significant costs related to the loss of customers and are trying to better understand, measure, manage and improve customer retention.
Although almost all companies have carefully designed processes for assessing the profitability of their products, most are far behind in assessing the profitability of their customers. Clearly, to enhance value from its customer base, a company must develop the capacity to measure the profitability of its customers so that it can develop appropriate strategies for effective profit management.
This tool provides a systematic approach for addressing customer value issues such as:
- Customer segmentation
- Measuring profitability
- Estimating customer lifetime value
- Identifying additional sources of customer value
- Managing to enhance customer profitability
This tool demonstrates how organisations can create more value for, and derive increased value from, customers. By developing a more complete picture of the value of its customers and customer segments, a company can improve overall profitability by improving profit margins, increasing the lifetime value of customers and enhancing customer impact.