Customer Value Foundation ®

. : An Arm of Inter-Link Services : .

Customer Value Management: An Introduction Though the purpose of any organization is to create satisfied customers, these are scarce in most companies! LOYAL customers are the only "Capital" that can be used in a sustainable way to create company assets and profits. We have also learnt that satisfaction does not necessarily lead to loyalty. Increasing Customer Value Added does lead to loyalty. Customer Value Management is a strategy to develop profitable lifetime relationships between the Organisation and its customers based on mutual value creation.

Contents: Customer Value Management (CVM): An Introduction Customer Capital: A Definition Building Customer Capital What is Customer Value? Moving Ahead from CRM to CVM Organizational Structures Value Creation through Customer Value Management About Us Contact Mr. Mahajan's latest book is out. Click here to order your copy

Customer Value Management: An Introduction Though the purpose of any organization is to create satisfied customers, these are scarce in most companies! Satisfied customers are the only "Capital" that can be used in a sustainable way to create company assets and profits. Today, most investors view companies on the basis of the asset value of their customers. For example, Vodaphone paid Airtouch $7000 per existing customer. In terms of the value of potential customers in the licensed territory, the figure was $265 each. Deutsche Telekom valued Voicetouch customers at $22,000 each. Studies show that creating value for customers creates value for the organization, and leads to repeat sales, and increased profits. Back to Contents

Customer Capital: A Definition Customer Capital = Asset value of current customers = Value of existing relationship + Value of potential future earnings (more and more often from existing customers) + Value of referral power (Customer Franchise) - Cost of retention Very few organisations are aware of the true lifetime value of their customers. Many calculations do not factor in the additional potential value of the customer as part of their third party Sales/ Marketing/ Promotional force. Quantification of Customer Lifetime Value is the first step in instilling a customer centric culture within an organization. Back to Contents

Building Customer Capital The only way to create long term value for the company is by creating value for the customer. This will incentivise the customer to create value for the organization both through his/ her business and through referral selling for you. Customer Value Management is a strategy to develop profitable lifetime relationships between the Organisation and its customers based on mutual value creation. Back to Contents

What is Customer Value? Customer expectations are different from customer values. Customer expectations of an organization are not necessarily in synch with the Organisation's desired image. If customer expectations are low, meeting them may lead to customer satisfaction, but this alone does not get true customer loyalty. If customer expectations are higher than the actual delivery, customer loyalty is doomed! Customer Value needs to be seen from the customer's viewpoint in terms of the value s/he sees in interacting with the organization. Interaction by definition should be a two way process. However, the choice to interact with an organization rests solely with the customer. Organisations must be customer centric. Customers see value when they are offered services that complement their own value systems on physical, intellectual and emotional planes eg Quality, value for money and style. Alignment of the value needs of a customer and the organization maximises profits and reduces stress. Treating customers as 'Mentors' affords an understanding of which services are important to customers and enables the adding of value at each Customer touch point leading to customer delight. Customer delight leads to Customer commitment, repeat business and the creation of ambassadors for the organization for new business. Back to Contents

Moving ahead from CRM to CVM The old definition of "Brand Loyalty" as customers being loyal to a brand has been turned on its head - today, the brand has to be loyal to the customer. In other words, the brand must deliver on its promise, on the customer's expectations and meet customer values if the organization is to expect repeat purchase. The key to success is to build and maintain a brand that resonates with the customer's own values. The process of getting existing customers to buy more and buy more often has generally been tackled through Customer Relationship Management - CRM. Both the organization and the customer usually understand CRM to mean "Loyalty Programmes". While these are appreciated by customers for the reward and discount elements of the programmes, the individual recognition element is often lacking. In truth, most CRM programmes are process centric and not customer centric. The majority of organizations treat these as "Cost" programmes. For example, many airlines feel 'trapped' by their frequent flyer programmes into a never ending cost spiral of matching competitive offers without getting true loyalty from their passengers. CRM Loyalty programmes are usually the reserve of Sales & Marketing, while customer touch points range throughout the organization. It is therefore imperative that the entire organization is attuned to enhancing and adding value to all customer interactions. This is where Customer Value Management - CVM - steps in. Back to Contents

Organizational Structures   Back to Contents

Value Creation Through Customer Value Management Companies often wonder what value/profit is created by instituting Customer Value Management. The following benefits accrue: Customer Retention: There is a savings from not losing a customer, the cost of finding new customers is 5 to 10 times that of servicing an existing customer Increase Wallet share of a customer Customer Lifetime Value: The profit created from business from an existing customer through his lifetime Customer Referral Value: Utilising the customers extended family, personal and business contacts to gain new business Unsolicited referrals made by a satisfied customer who talks about a company's product, service and positive experiences he gets Attracting the Customer to the Corporate Brand, and making him choose this Brand across the board for their purchases Customer Capital, the measure of the value of the Customer, and the effect it has on share prices/valuation of the company Improved price or value since (quality + service)/price is somewhat of a constant. Better customer service/value should lead to a better price. Inter-Link and TLC through The Customer Value Foundation provides strategic and implementation advice on Customer Value Management. Back to Contents

About Us GAUTAM MAHAJAN, President, INTER-LINK, in the last ten years has helped many Multinationals enter India and Asia. Worked for Continental Can USA for 17 years, as General Manager Plastics / Coextruded Products / New Ventures / Business Development/ Director Technology / Marketing / Manufacturing / R&D. Started 10 US plants in 2 years; 15 US Patents, Honours: Fellowship Harvard Business School, Regional President and Chairman, Economics Relations Committee Indo-American Chamber of Commerce Committee, Vice President All India Plastics Manufacturers Association/ Chairman PlastIndia Committee/ Trustee Plastics Institute of America/Distinguished Alumni Award from Illinois Institute of Technology. Founder, Customer Value Foundation. Experienced in Customer Value Strategy and implementation, He invented the Customer in Center ® concept, and in converting anonymous customers to known customers LARRY MALARKAR, President of TLC Marketing, an expert in Travel and Tourism, and Customer Value Management. Formerly, VP of the Oberoi Group, the itt Sheraton Hotels in USA, Egypt and Mexico, and the SAS Hotels as Director of sales. CVM implementation, CRM, Call Centers, Loyalty program management experience. Overall 30 years of experience. Back to Contents

Contact Gautam Mahajan President Inter-Link India K 185 Sarai Jullena, New Delhi 110025, India Tel : +91-11- 2692 9033, 2683 1226, 2692 2006 Fax : +91-11- 2692 9055 E-mail : mahajan@interlinkindia.net , inter_link@vsnl.com web-site : http://www.interlinkindia.net Back to Contents

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