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Hot Seat: Should CRM Focus on Maximizing Top Customers or Boosting the Profitability of Others?
Some loyal customers may be only marginally valuable today, but enormously valuable tomorrow.
For the rest of the November 2004 issue of CRM magazine please click here
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Sam Gragg, director, Customer Management Solutions, Teradata "Companies cannot afford to concentrate on a small subset of customers...because most companies don't calculate profitability accurately enough to be sure they would select the right ones." Jim Kent, CEO, Exact Software North America "Often the 'most profitable' label is only applied to short-term measurements, when in fact long-term customers will usually produce more for your company over the life of the relationship. Only focusing on a select few limits your chances for maximizing revenue in the future." Tom Gaither, vice president, marketing, D&B Sales and Marketing Solutions "All things being equal, a dollar spent on acquiring additional, profitable revenue through existing profitable relationships will have a more positive impact than a dollar spent to correct the profitability of a broken relationship. However, both are crucial components to CRM success." Dr. Matt Hasan, managing principal, Sigillum Corporation "The highest return on investment may not come from the most profitable customers. [They] tend to have reached their peak in terms of potential for upsell and cross-sell. Customers who are lower on the profitability spectrum are more likely to yield greater return. In fact, some customers who are currently unprofitable may become profitable with the additional investment." Ben Kaplan, vice president of marketing and products, Kanisa "Over the past decade companies have focused on their most profitable customers by using CRM analytics and analytics-driven business processes. But with returns on these investments slowing down, there's a new emphasis on improving the profitability of broader customer segments." Karen Richardson, CEO, E.piphany "Before companies can pick and choose the high-profit customers to pursue for maximum revenue, they need to first focus on increasing revenue levels of all customers." Brian Kelly, executive vice president, marketing and product strategy, KANA "The most successful companies value each customer relationship equally and provide the highest and most efficient level of customer service to the entire customer base...[maximizing] revenues and profitability across the board."
Jeff Zabin, director of marketing, Fair Isaac "Companies need to present their most profitable customers with context-sensitive cross-sell opportunities. At the same time, they need to either invest or divest in those customers that are on the fence in terms of profitability. But remember: Some loyal customers may be only marginally valuable today, but enormously valuable tomorrow. Assigning customer value means determining a customer's total potential value over the course of his or her cumulative transactions--past, present, and especially future." Allen Bonde, president, Allen Bonde Group "Profitability is a function of revenue--and the cost of selling and servicing an account. Study your best customers, and use their behavior as a model for changing the behavior of others."
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