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Article : How Does Customer Value Management Compare With Customer Satisfaction Metrics?

Customer Value Management enables companies to take full advantage of the economies of loyalty by: increasing retention, reducing risk of churn and amortising costs over longer more profitable periods of engagement.

Satisfied customers are not necessarily loyal customers. Escalating expectations and increasingly competitive markets can create fickle behaviour in customers. Those companies that have 'fans' rather than customers and enjoy high Net Promoter Scores of 70% plus, are likely to have the most spectacular growth. This is because the most valuable customers to a business are those that buy again and again and those that actively recommend the business to friends and colleagues. The value of word of mouth buyer is undisputable; people systematically rate word of mouth above all other forms of communication when deciding what to buy.

The Key Metrics For CVM Are:

Right Customers

Acquiring the 'customer' who will be of most value to the business, for instance those customers who will repeat purchase and promote the business through word of mouth recommendation.

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Right Relationship
For any business the right relationship is one that maximises a customer's long term value. Customer's who don't receive the right treatment and often receive too many conflicting offers, loose value rather than gain value.

Right Retention
Effective retention means retaining the right customers, not every customer. Businesses need to focus their retention actions on customers with the highest long term value. Allocating spend to retain marginally profitable or even unprofitable customers actually hurts the overall value of the base – ironically especially if these retention efforts succeed.″

What Are The Benefits Of CVM?
Customer Value Management helps companies generate more and better value sales. It also allows companies to build closer relationships with customers and prospects. Better use of sales and marketing data resources, plus more effective data acquisition strategies and tactics aimed at finding new sales opportunities.

What Are The Different Focus Areas Of CVM?
One could argue that the two definitions of value answer this question:

Value can be defined in monetary terms for the client business. For example 'how much revenue does a customer generate for a business during the relationship', which is usually measured by long term value. However what about defining value from the customer's prospective? For instance looking at the relationship between the perceived benefits the customer gains from a product or service and the total expenditure the customer makes in terms of time, money and other efforts demanded by obtaining and using the product and service. As a result I believe the focus areas for CVM can be identified as:

  • Increasing long term value

  • Increasing customer benefits (perceived or real)

  • Reducing customer effort 'expenditure'″

What Does CVM Seek To Answer?
In our experience, profitability does not automatically increase when a business creates a "single view" of the customer or determines their value. In fact, revenue growth depends on a carefully managed combination of customer behaviour and client activities. By identifying the customers you want to retain, expand, attract and cost-manage, you can use best practice strategies to develop profitable relationships and drive organic growth.

What Are Common Bad Practises That Companies Commit Towards Its Customers Preventing Them From Reaching Their Full Potential?
Common bad practises by companies can include ignoring the customer lifecycle, for example not incorporating time-base analysis in identifying highest value customers and offering uniform multi-channel delivery to customers. By offering this form of delivery channel, companies are failing the customer because it ignores the fact that each customer is different. Lastly seeing the call centre as a cost centre does not allow companies to recognise the potential of communication to positively influence value, both for the business and for the customer.

About Philip Shuldham-Legh:
With over 15 years of experience gained working in the customer management arena, Philip has experience across all aspects of the customer lifecycle. Throughout his career he has worked with clients in areas from awareness and consideration through to sales, retention and win-back. At The Listening Company Consulting, Philip is charged with providing thought leadership on customer strategy and market place trends.

About Serco:
Company LogoSerco’s Business Process Outsourcing (BPO) capabilities offer middle and back office solutions to public and private sector organizations globally. With a presence in ten countries, 98 locations and a strong workforce of more than 50,000 employees it is among the top 20 global BPO players with onshore, offshore and near shore capabilities in the US, UK, Europe, Middle East, India, Mauritius, Philippines, Guatemala and Australia. With flexibility in designing solutions to suit client requirements, Serco’s BPO capabilities have helped clients to re-engineer processes across industry verticals such as Banking & Financial Services, Travel, Transportation & Hospitality, Healthcare, Logistics, Utility, Retail & Manufacturing, Telecom, IT & Online services, Media, Education and Entertainment. We provide transactional, process and voice support, finance and accounting services, and business transformation consulting, making us strongly placed to provide our customers with a broad range of end-to-end business services.
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Published: Friday, October 27, 2006

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