By M. Isi Eromosele

In most economies around the world, products, marketing campaigns and sales channels are transitory. As such business managers need to recognize that development of customer relationships is integral to achieving sustained profits.

There is a common formula that states: a 5 percent increase in customer retention leads to a 25 - 80 percent increase in company profits.

Loyal customers are invaluable to the growth of a company. Companies must make the maximizing of customer value an open and deliberate business goal.

As companies transition from product or campaign centric to customer centric marketing, focus should be shifted to facilitating an increase in the lifetime value of their customer base, one customer at a time. This is the core principle of Customer Value Management.

Customer Value Management requires managing every customer relationship with the goal of achieving maximum lifetime profit. Implementing customer value management would enable a company to benefit from the economics of customer loyalty through increased retention, reduction of risk and amortization of acquisition costs over a longer and more profitable period of engagement time.

Customer value management seeks to increase the collective value of a company’s customer base, customer by customer. While every individual customer may not be profitable, each one must be managed to maximize profits in general.

Customer Value management implementation refocuses the enterprise from managing products or marketing campaigns to managing the profitability of every individual customer during the entire lifetime of the relationship.

In making this move, companies need to stop merely discussing one-to-one marketing and actually start developing their analytical and operational capabilities toward implementing it. Those that do can expect increased long-term profits.

The customer value management cycle starts with the acquisition of high value customers for the company. These are customers who will stay loyal and engage in doing repeat business with your company for a very long time.

As such, it is imperative that companies search for and identify high value customers to gauge their lifetime value. All customers are not equal. While a customer may be a high value one for your competitor, he/she may turn out to be unprofitable for you.

Since customer acquisition is so expensive, effective customer value management requires that companies build up the analytical capabilities to identify customers who will be loyal and profitable.

The best source of information about the customers you desire is the in-depth analysis of your current customers - these are the people you already have wide-ranging data on, including their buying habits. Granular segmentation and analysis of your customer base will reveal hidden characteristics and tendencies that relates to value.

Finer segmentation that includes frequency of purchase could reveal that some customers who were previously not considered as high value are actually so. Such in-depth understanding of who your best customers are facilitate your ability acquire the type of customers your company can serve most profitably.

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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