Page 75 - DMGT308_CUSTOMER_RELATIONSHIP_MANAGEMENT

Customer Relationship Management

Notes 3.5 Summary

 At best-practice organizations, customer profitability is owned by marketing, with finance
as a key stakeholder.

 Study participants have defined a small, dedicated group of two to five individuals who
are involved in calculating and reporting customer profitability. Best-practice partners
have developed an enterprise-wide view of the customer.
 Best-practice partners have clearly defined customer segments and sub segments. Most
have developed five to nine macro customer segments. Best-practice partners use multiple
bases for customer segmentation such as needs, geography, and customer profitability.
 Best-practice organizations capture revenues and costs at the transaction level for each
specific customer account. Best-practice organizations take a holistic view of customer
profitability and include lifetime value and customer valuation metrics in the calculation.

 Best-practice organizations include the majority, but not all, of their costs in the customer
profitability calculation. Best-practice organizations use appropriate methods for cost
assignment.
 Best-practice organizations all work closely with IT. Enabling technologies for calculating
customer profitability include data warehousing, CRM systems, data mining, external
databases, and predictive analytics. At best-practice organizations, customer profitability
information is used as an input in many areas.

 Best-practice organizations emphasize intelligence (e.g., decision support), not routine
reporting, in customer profitability information dissemination. Best-practice organizations
secure buy-in from the users and upper-level support for customer profitability initiatives.
 Best-practice organizations hold employees accountable for customer profitability.
Best-practice organizations use customer profitability and segmentation to appropriately
align sales and marketing resources.

3.6 Keywords

Customer - Repeat Purchasers: (a) number of repeat purchase customers over the past year as a
% of total number of customers or, (b) Value of repeat sales as a % of total sales or, (c) % of
purchases by current customers. This measure provides an indication of customer retention/
loyalty.
Customer Account Profitability: This is a measure of the value of specific customer accounts.
Customer Acquisition Cost: This is a measure of the cost involved in attracting or retaining
customers.
Customer Relationship – Duration: Customer relationship – duration is the average duration of
relationships of an organisation with its customers or, the duration of relationships with key/
individual customers.
Customer-Projected Retention: This measure provides an indication of projected customer
retention/loyalty and may be effective in the measurement of current customer satisfaction as
opposed to measurements relating to customers already lost.

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