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CUSTOMER RELATIONSHIP VALUE
Created: Wednesday, 18 September 2013 10:11
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CUSTOMER RELATIONSHIP VALUE

The purpose of this article is to detail customer value & customer relationship value thinking .
Customer relationship value, is more customer life-time value and customer value is more or less yearly or budgeted value for the customer. We are trying to figure out for example the profitability of the customer this year. First of all, we have to think what different dimensions determine relationship value.  What are the dimensions of customer relationship value in your business. Dimensions are business and industry specific although there are few similar dimensions in all businesses.

It is very important from the strategic point-of-view to define relationship value dimensions. Then define the weight of these dimensions. Weight depends on the strategic business situation.
Depending on what company wants to aim:
    • what are the strategies?
    • what is the strategic situation?

According to those a company puts different weight for dimensions. Customer Relationship Value dimensions

One very simple and evident is customer profitability. Profitability is self-evident and one can say it in relative terms or in absolute terms. I prefer however that one see how profitable specific customer is; how much profit this single individual customer brings to our company for this year. If one considers relationship profitability, within customers lifetime. There are certainly more to relationship value dimensions but not as important.

Then we can think about reference value. Reference value is something that relates how known, how good a reference the customer is to us. Is customer for example making recommendations on behalf of us and can we refer to customers as being our customers.

Example: Nokia is a very good reference customer  because it is known, it is very well managed and operates globally. In the networking type environment the reference value is becoming more and more important.

Then we have contact value, and this means that customers are gateways for us to potential customers. If customer is part of a big concern it may be that this customer gives us an opportunity to go to some potential customers within the group, ABB is a very good example. And because more and more companies are in this type of structure, this contact value, it is becoming more and more important.
Then one can define learning value, learning value of a customer. This does not mean that customer has to be a difficult customer. It can be a customer that is a top company in its field. We can learn about this company and the industry. In many cases it is hard to be the top company in any industry so there must be something to learn.
Certainly these value dimensions are to some extent inter-related. Contact value and reference value for. Ex. Learning value in a rapidly changing environment, it is very important.
There might be some value dimensions to consider. It is not very good to have too many dimensions because it makes the systems  more complicated.  These are probably the value dimensions that almost always come into value system: profitability, reference value, contact value, and learning value. Read the full article on Coffee Break
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