Opinion: Marketing Society - Take long view on customers

By now, all marketing folk worth their salt recognise the real value in the concept of customer relationship management (CRM). It is simply sound business practice to understand the way your customers interact with the brand and the company, and to use that knowledge to act accordingly whenever there is contact.

So why is there disillusionment around CRM? First, the sound business sense in CRM has been overshadowed by the technological and financial implications of making it work in practice.

Second, CRM is much more than a new data warehouse. It's about the structure and culture of the organisation and its ability to respond to customers.

Marketers should embrace CRM, but focus on a new set of initials - CVM (customer value management).

CVM is about proactively creating valuable customers - measuring their current value, assessing potential value and creating strategies to increase that value over time. How many marketers can report on the current value (that's yield), let alone the potential value, of their customer base?

Consider mobile phone networks. New subscribers are universally bribed with a subsidised handset, which takes 15 to 18 months of serious calling to pay back. At this point the fickle 'high-value' customer is enticed away by a competitor to enjoy a new, improved handset upgrade. And so the cycle continues. It is often the medium-value subscriber, who sticks with the same handset, that generates the real value.

CVM tries to understand the opportunities for value growth within customer segments and to create strategies which will change customer behaviour over time to deliver that potential. Unfortunately, there are real barriers to implementing CVM. Marketing is often measured over a month, a quarter or, if they are lucky, a year. Customers tend to look for a far longer-term relationship with a company.

Take a typical full-service airline. Its customer profile is broad, spanning backpackers, junior executives in economy, senior executives in business class, singles on a city break, families on a long-haul holiday, retired couples visiting family overseas and so on. It needs to appeal to all these audiences, but also to recognise that over 30 years, a single loyal customer could fall into all these categories. Imagine how much stronger customer relationships would be if you recognised the past and anticipated the future, instead of simply marketing to the now.

Marketing investment typically looks to a return within the financial year - not over a customer's lifetime. And marketers often change jobs after a year or two. This doesn't engender the long view that is required for joined-up CVM.

Finally, consider the way your business is valued at present. It may report to its shareholders on customer numbers, on revenue, on overall profit, but rarely on customer value or potential value. Since shareholders are often investing for the long term, this could soon be the most valid metric.

CRM is here to stay, but sound CVM is the key that will unlock the profit potential from customers in the future.

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