More profitability, who doesn't want that? That means looking for ways to bind new customers to your brands, keep existing customers happy and increase the value per customer. The trick here is to offer the right customer, at the right time, the right product at the right price. But how do you figure out exactly where this balance lies? And which customers yield the most return? This is where Customer Value Management (CVM) comes in.
Customer Value Management provides insight into the quest for profitability
What is Customer Value Management?
CVM is an integrated approach to managing the relationship between your company and your customers by focusing on the cost and revenue per customer during the relationship. The customer view built from information from different disciplines is the basis for driving customer value. The growth in the amount of information at your disposal makes building a detailed customer view increasingly possible. With a multidimensional approach, different sources of information within the organization, such as marketing, product and service data, are linked to the financial data to create a detailed 360° view of the customer. This picture is based not only on a snapshot of the return per customer, but also on the return throughout the relationship. By linking different sources, the relationship between financial, operational and commercial performance also becomes more visible. Based on this new knowledge, the quality of (financial) decisions improves. Consider, for example, decisions about which customers are worth investing extra in, and which customers may need to be parted with.
Investing in Customer Value Management pays off
By using CVM, you gain more insight into the behavior and needs of your customers. With these insights, you as a company can then analyze how to improve customer relationships and increase returns. Think about:
Winning and retaining customers
By getting a sharp focus on which customers are the most profitable, you know exactly which customers should receive the most attention, how to reach these customers and how to strengthen the relationship. These insights translate into choices, such as which sales channels and marketing mix lead to an efficient and effective connection of the customer to your business. With the insight gained, it is also obvious to win back valuable customers who have walked away in the past through targeted campaigns. CVM analyzes customer relationships, even afterwards if the customer does leave unexpectedly. With this feedback, you can work concretely to improve the offer.
Greater understanding of product consistency
Knowing which customers are most interested in certain products and services also provides greater insight into what other products could potentially be sold to the same type of customer. Or which products or services may be of interest to certain customers in the future. Thus, products and services can be sold more frequently.
Reduce costs through better information
By strengthening the understanding of customers, you will know which customers are profitable and which customers are at a loss. For loss-making customers, you can look at ways to increase returns. Perhaps even parting with them. Getting to know the customer better also reveals which marketing tools and sales channels are more profitable. By cutting back on marketing and sales channels that don't work, you can use marketing resources more efficiently.
Accelerate to a value-driven organization
Companies that implement CVM do not become customer-driven organizations overnight. This takes time and dedication. Still, there are some things you can put in place to use CVM to accelerate the transition to a customer-driven organization:
1. Create support
As an organization, it is important to create support for driving customer value. Management teams must be encouraged to act on the basis of customer value. One way to create more support is to convince managers at different levels of the organization of the power of CVM. These managers can then ensure that CVM is transferred to the rest of the organization.
2. Focus on the customer, not the technology
Driving customer value should not be driven by IT; rather, the customer should be the focus. Many companies assume that more technology leads to better insights. The pitfall of this is that there is too much focus on technology, rather than on understanding the customer and their value to the organization. Viewing technology merely as information that provides insights into touch points and customer relationships puts more focus on the customer.
3. Dare to use data
For CVM, different sources of information within the organization are connected. Different sources often contain different definitions for the same information. In addition, differences exist between ways of capturing information in these sources because departments do not speak the same language. For CVM, the challenge lies in creating consistent definitions that are widely supported by the organization. Next, the challenge is to ensure that consistent definitions are actually used and that departments do not fall back on their own definitions. Making this possible requires people who dare to look outside existing silos and can foster collaboration with other departments.
4. Invest in analytical capacity
When implementing CVM, companies often go no further than monitoring and reporting the current situation. This is not sufficient to provide insight into the maximum value of customers. This requires an approach that looks beyond the current situation and can analyze how the situation evolves over time. Therefore, it is important for companies to invest in their analytical capabilities and thereby actively seek the link between customer value and winning, retaining and strengthening their relationships with customers.
Sustainable competitive advantage
In a quest for returns, CVM helps optimize investments and increase returns per customer. This gives you greater insight into the relationship between financial, operational and commercial results. By showing at a detailed level what return a customer produces and is likely to produce in the future, you can make stronger decisions as a company. With these insights, you can learn to better align your product and service offerings with your customers' needs. If you succeed in this, it will result in a sustainable competitive advantage and a strengthened financial position.
Search further?
In our webinar "the 7 steps to understanding customer profitability," we'll take you through our roadmap to understanding your customers' profitability. And we discuss the 7 steps to gain insights that will help your organization make the right strategic decisions. Watch the webinar directly via this link!
