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Managing Customers Profitably

Managing Customers Profitably

Lynette Ryals

ISBN: 978-0-470-74236-5

Jan 2009

384 pages



This book is a response to a need in the market place in the fast-growing field of customer profitability analysis and the profitable management of customer relationships. It combines innovative approaches to calculating the value of customers, with the management strategies necessary to make and keep customers profitable.

It includes easy-to-follow instructions on how to calculate customer profitability, including worked examples (non-technical) and discusses strategies and their applications for organizations to manage customers profitably. Based on cases and feedback from the KAM Club and other research, there will be many business-to-business as well as business-to-consumer examples.

The book assumes some level of numeracy in its readership.

The contents include:

  • Assessing product costs, costs to serve and how these can be estimated, and how to deal with customer-specific overhead costs.
  • It discusses the uses and limitations of the use of customer profitability analysis, and illustrates how to calculate customer lifetime value using two methods, one with actual numbers and one which estimates relative customer lifetime value.
  • Provides an innovative approach to calculating the lifetime value of a customer by taking risk into account.
  • Demonstrates how to recognise and value the relationship benefits of customers, such as word of mouth.
  • Brings into discussion the idea that how customers are managed, links to their profitability.
  • Describes how financial portfolio analysis and theory apply to marketing and how, their application to marketing relates to the optimisation of marketing spend.

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Section One: How to Value Your Customers.

1. Latest thinking on valuing and managing customers.

2. Customer profitability analysis.

3. Calculating customer profitability.

4. How to calculate customer profitability for large customer numbers.

5. Customer lifetime value.

6. Calculating customer lifetime value.

7. Calculating and using customer equity.

8. The relational value of a customer.

Section Two: How To Manage A Customer Portfolio.

9. Managing a customer portfolio using customer equity.

10. The customer portfolio using both supplier and customer perspectives.

11. Risk.

12. Service-based segmentation.

Section Three: The strategic decisions that maximize the value of your customers.

13. Selective customer acquisition and retention.

14. The role of pricing in creating or destroying value.

15. Increasing customer equity using value propositions.