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White Paper

Customer Value Management

ᮣ

New Techniques for Maximizing the Lifetime
Profitability of your Customer Base.

Author:

Jeffrey Pease.

Contributor:

Susan Marfise, Dion Wright.

Audience:

This paper is intended for enterprise managers who need to understand customer value management, the next step beyond traditional customer relationship management.

Contents

Customers Are Your Critical Asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ii
Customer Value Management Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Three “Rs” of the CVM Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Right Customers

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Right Relationship

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Right Retention

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Business Objects • Customer Value Management

i

Customers Are Your Critical Asset

In an economy where products, marketing campaigns and even sales channels are transitory, business managers increasingly recognize customer relationships as the key to enduring profit.
Bain and Company’s Frederick Reichheld has demonstrated that a 5% increase in customer retention leads to a 25-95% increase in company profits.
There are numerous reasons for this spectacular uplift. For example, if customers who make ongoing purchases have longer to offset the cost of acquisition. Experienced customers also naturally become more efficient at dealing with the business, and therefore more cost-effective to service. Loyal customers are both a scarce resource and a source of value. How can business managers nurture this