Customer Segmentation - Data Mining Techniques in CRM: Inside Customer Segmentation - page 221

Retention should be set as a top priority for high-value customers. In many
cases a relatively small percentage of high-value customers accounts for a dispro-
portionately large percentage of the overall company profit. Therefore maximum
effort and allocation of resources should be made for preventing the defection of
those customers. Additionally, the organization should try to further grow its rela-
tionship with them. Development through targeted cross- and up-selling campaigns
should be set as a high priority for medium- and low-value customers with growth
potential. At the same time, though, driving down the cost to serve should also be
considered for those customers making trivial contributions to the organization's
profitability. The main priorities by core value segment are illustrated in Figure 5.9.
Table 5.7 provides examples of how the value segments can be used to support
the design of different strategies, the prioritization of the marketing interventions,
and the delivery of differentiated service level.

Table 5.7 Differentiated treatment by value segments.

Handling by Retention Use of Launch of a

customer activities communication strategic

service channel product

High-value cus-
tomers

Requests/
inquiries/
complaints/
interactions
handled by
the most expe-
rienced rep-
resentatives,
with top prior-
ity and with
minimum
''wait'' time

Maximum effort
and allocation
of resources
for retention
and preventing
churn. Close
monitoring of
their churn
risk with the
development
of respective
churn models.
Offer of entic-
ing incentives
when at risk of
defection

Identify and use
the preferred
communica-
tion channel

Communicated
to all cus-
tomers
through their
preferred
channel

Medium-value
customers

Their handling
is second
in priority
compared to
high-value cus-
tomers

Moderate effort
for retention
and preventing
churn

Use the pre-
ferred channel
but also take
the cost factor
into account

Communicated
to all cus-
tomers mainly
through their
preferred
channel

( continued overleaf )