The 4 levers of Customer Value Management


At the heart of every business are its customers. And if you’re looking to improve your business performance, your customers should be at the centre of your company strategy.

Experience has shown that by applying a Customer Management (CM) strategy, improvements in business performance are achievable where it counts most – the bottom line. But CM strategies can’t remain purely theoretical and strategic – they need to be translated into practical tactical interventions which deliver real results.

There are four basic principles involved when applying CM – Retention, Efficiency, Acquisition and Penetration. These four concepts (a REAP strategy) are levers which create improved business performance and are intended to support rather than replace current business planning activities.

Applying CM encourages companies to build an understanding of where your business comes from in terms of contribution from new customers, contribution from existing customers and contribution from increased sales and/or service to existing customers. Once a company understands this, you are then able to model and develop different REAP strategies for different groups or segments of customers.

Excellence in CM begins with a deep understanding of the nature and value (actual and potential) of existing customers and potential prospects. This needs to be supported by a robust strategy for managing them and clear plans of the type of management activity to be implemented for different types of customers.

One of the most cost-efficient ways to drive operating profit in any organisation is to examine the means of retaining good customers. However this can’t be done in isolation because simply retaining customers at any cost can represent reduced value to the company. Both extremes must be examined in order to see where the greatest value can be created.

Without the planning and management of Acquisition activity, ‘acquisition at any cost’ may result. Attention must be paid to the targeting of good quality new or previous customers and the managing of the relationship with them from their first expression of interest right through to their conversion to a customer.

Equally critical to an organisation’s return on its customer investment is penetration i.e. the ability to develop more value from existing customers through cross-sell and up-sell activities. An investment in extending the value of existing customers can deliver much more value than the same investment in winning new customers.

Implementing a CM strategy and utilising the REAP concept begins with extensive planning. This is not a trivial or instant process. Before any company embarks on this approach, clear commitment from the senior management team is imperative. Since the tools necessary to implement CM may need to scale to millions of customers, full support is needed from the IT and information management teams. This commitment must be matched to a thorough activity plan, further supported by access to the necessary skills and competencies. The whole exercise will be redundant unless it results in potential changes to business development activities.
CM is an extensive and even onerous undertaking for any business. However, an improved understanding of the customer, the creation of strategies and tactics that enable your organisation to generate value for the customer, carry with it the promise of great rewards, improved business performance and the creation of true value.

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