How to manage and grow your best customers

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Investing in customer relationships is the key to long-term, sustained profitability. In the full article from which this abstract is drawn, we explain how a customer strategy focused on optimizing the customer life cycle and customer lifetime profitability (CLP) can deliver this.

Many organizations still don’t appreciate how significant social networks have become to their customers and their businesses.

What does customer value really mean?

The concept of a customer lifetime value has been discussed for some time. What EY has found is that many of the businesses we work with don’t yet have a detailed understanding of the cost-to-serve component of their businesses. The core idea behind CLP is that companies can improve their profitability and lower their costs by being more customer focused.

Using CLP to improve performance

CLP is a measure of the underlying profit of an organization’s customer base, taking into account the future revenues and costs for the lifetime of each customer. By implementing a CLP model, an organization can focus its spend and effort toward growing and managing the most profitable customer segments and customers.

The benefits of adopting a CLP approach include:

  • Maximizing profit return on the customer base
  • Improving market performance
  • Improving productivity and profit performance
  • Increasing customer satisfaction
  • Optimizing sales and marketing
  • Improving infrastructure decisions

CLP is an evolving journey

It is vital to ensure that CLP is developed with all customer touch points and business strategies implemented together. CLP will fail if there is a disconnect between its stated goals within a business and the way this is actually delivered to the customer. A holistic approach is critical to the success of CLP and the business strategy that underpins it.

When businesses understand their customers at an attitudinal, functional and geographic level, they can start to develop new products and services that will speak directly to these customer groups. This is the essence of CLP and the tangible delivery of improved levels of profit with reduced costs. And, of course, businesses can begin to get ahead of the market with new products and services, which then deliver a massive commercial advantage in their sectors.

The complete article was written by:

  • Jenny Young
    Partner, Advisory, EY, Australia

Read the full articlepdf418.68 kB

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