What are your customers worth?

January 3, 2015

What are your customers worth?

If you consider your company to be customer oriented, you should be able to write down the names of your five best and five worst customers on the back of an envelope.

Next to each name, you will be able to state the approximate amount of the net profit/loss they contributed to your firm’s bottom line last year. You will also be able to jot down how much your business is expected to grow with each of them is in the years to come, and how likely it is that they will move some or all of their business to a competitor.

If you are not able to do this, there is a considerable risk you are betting some of your company’s scarce resources on the wrong horses. To reap the full benefits of customer orientation, companies need to differentiate their resource investments according to the profits various customers generate now and/or are expected to generate in the future. This discipline is referred to as Customer Value Management (CVM).

The vast majority of companies characterize themselves as customer oriented, yet less than 40% quantify the financial value of their customers on a regular basis. This is somewhat surprising, especially because our study shows that companies using CVM as part of their customer orientation strategy are rewarded financially. In fact, companies that consistently measure and manage the value of their customer relationships achieve a Return On Assets (ROA) twice as high as companies that do not.

Read the whitepaper