Customer Value Measurement – An Art and a Science
How should a company measure customer value? According to Onat Unal, a senior consultant at Peppers & Rogers Group Instanbul, there is no one-size fits-all answer. In fact, the definition of a high-value customer is often different for companies that compete in the same market space. Rather than sticking to one single measurement, Unal suggests using several different calculations of customer value:
Current revenue: The most basic approach is to calculate the monthly revenue average for each customer and analyze the trend and variance of the revenue over time.
Length of relationship: New customers may behave differently from those who have been around for an extended period of time. Managing the new-customer segment separately can help a company evaluate post-acquisition activities and improve the new-customer experience.
Costs and profitability: Distributing costs to the customer level may be financially sound, but determining the true profitability of each individual customer would be a challenge. A better measurement would be to analyze the costs that pertain to customer behavior, such as payment punctuality and channel preference.
Future and potential value: This measurement helps marketers understand how long customers might retain their value and whether their value will increase or decrease in the future.
Although the act of measurement is important, acquiring actionable insights is its main purpose. Once you understand the value of a customer on an individual level, you can begin to implement segment-based marketing strategies designed to grow the value of that relationship over time.
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