Page 76 - DMGT308_CUSTOMER_RELATIONSHIP_MANAGEMENT

Unit 3: Analysing Profitability of Customers

Customers - Value of Key Customers: (a) value of total sales or contracts to key customers as a % Notes
of total value of gross sales or contracts, per period, or, (b) value of sales or contracts gained
through referrals from key customer as a % of total sales or contracts. This is a measure of the
performance of identified key customers, allowing the effectiveness of special relationship
strategies to be assessed and refocused as necessary.
Market Share Projection: Market share projection is a measure of projected market share,
commonly used in setting goals or targets in new product promotions or when penetrating new
markets with existing products.
Return on Investment (ROI): This measure provides an indication of how well profits are being
generated from use of the organisation’s resources. A measure commonly used to compare
performance between organisations; ROI is useful for assessing an organisation’s competitive
advantage. In this context it can be used to track the success of a CPM initiative.

3.7 Review Questions

1. What is meant by Lifetime customer value?
2. What do you mean by customer defection?
3. Give examples of customer’s defection from your surroundings.

4. Explain the concept of service failures.
5. What drives the customer defection?
6. What is base profit analysis?

7. Is there any difference between cost-volume profit analysis and base profit analysis, if yes,
what?
8. What is meant by value chain analysis?

9. How are calculations of sales and revenue made in value chain analysis?
10. Explain the scope of failures and defection made by customers.

Answers: Self Assessment

1. Customers Profitability Management 2. Return on Investment
3. Consumer Behaviour 4. Grading
5. Activity-based management 6. Value equity

7. External factor 8. Base profit
9. Five 10. Profitability
11. CVP analysis 12. Consumer complaint responses
13. Defection intention 14. Distinct

15. Operating leverage

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