By M. Isi Eromosele

For any company, the right relationship is the one that maximizes that customers’ customer lifetime value. It is imperative that companies maintain great relationships with even the most well chosen customers.

Customers who do not receive the right touch from your company will defect to your competition. Companies need to be able to discern customer differences, facilitating their ability to send the right offers to the appropriate customers.

The business objective of customer relationship management is to increase the size and frequency of customer purchases and extend the length of time that these customers continue to buy. Companies should utilize loyalty measures to estimate how long their desired customers would stay.

Customers do repeat business with companies that understand and respond to their individual needs, even when those needs change. To improve customer value, companies must understand differences between their customers and be able to track how every individual customer develop over time.

For high value customers, relationship managers should work hard to maintain loyalty, in order to extend the length of an already profitable relationship. The lifetime value of a customer who makes large purchases regularly over a 10 year period is significantly more than that of a customer who makes the same purchases for a 5 year period.

Customers that are not presently classified as high value may still have potential for growth into that category. Actions should be taken to encourage these customers to grow into being high value within a specified period of time.

Companies have to be able to distinguish between high potential customers and those who will always be low value. Upon analysis, companies should not waste resources trying to develop customers who will never grow.

Companies need to develop in-depth analytical capabilities in order to be able to identify high value customers who have migrated downwards and work to restore their value. This analytical resource could also be used to track changes in the value of individual customers and respond quickly to maintain and grow their value.

Effective customer retention means retaining the right customers, not every customer. Managers should focus their retention efforts on customers with the highest lifetime values.

Companies need not spend precious resources on retaining marginally profitable or unprofitable customers as this will diminish the overall value of their customer base. Right retention is therefore rooted in knowing which customers are most valuable, and why.

The correct analysis of lifetime value will enable customer relationship managers to take a long-term view , giving equal treatment to customers who are already doing a high volume of business and those whose purchases and actions indicate loyalty and increased profitability in the future.

After identifying the customers who are the most desirable, relationship managers should make sure that their retention activities provide value, not erode it. Since very loyal customers are less price sensitive, relationship managers should focus on retaining them through incentives other than price, such as special recognition and premium levels of service.

Customer value management offers a roadmap to acquiring, developing and retaining your most valuable customers. The benefit of making this investment is sustained and increasingly profitable customer relationships, the most enduring asset in today’s competitive marketplace.

Deepening and maintaining long-term customer relationships will enable your company to derive increased revenue from your customer base, as sales channels continue to grow.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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