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October 29, 2012

New Techniques for Maximizing the Lifetime Profitability of your Customer Base

Author: Jeffrey Pease

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 crucial asset? For a start, companies must make maximizing customer value an explicit and measured business goal. As companies evolve from product-or campaign-centric to customer-centric marketing, a set of best practices is emerging that focus on measuring and increasing the lifetime value of the customer base, one customer at a time. We call these practices customer value management.

Keywords: customer base, consumers, loyalty, customer retention, profitability, product management, attrition, retention

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