Database Reference
In-Depth Information
to customer revenues is estimated by analyzing the relevant data. After assessing the activity costs
by using ABC, the profitability of each activity is assessed by comparing activity revenues with
activity costs. Ultimately, ABRA separates the offerings contributing to customer profitability
from those incurring costs.
ABC is useful wherever the enterprise offerings are clearly separable from the underlying speci-
fications and can also be made to particular specifications known to add value for the customer;
the corresponding activities and costs can be identified and optimized (including elimination),
and performance can be improved without varying these specifications. In contrast, ABRA may
be useful in improving performance in cases like delivery of services (which are innately time
dependent and perishable) where the specifications adding value are not fully known and, more-
over, are inseparable from the corresponding activity or activities.
1. By allocating costs to customers and revenue to activities and, hence, by enabling
comparison of revenues to costs customer by customer and activity by activity,
ABRA also provides the rationale for evaluating and compensating individual
performance.
2. An ABRA-like approach can also be used for focusing on transactions driving
customer loyalty or retention; the costs and revenues will change suitably to
aspects that are relevant to the changed context.
15.8 CRM Metrics
Metrics help companies track and assess their performance and, more importantly, evaluate the
returns on their CRM initiatives. In the process of implementing CRM, managers have to deal
with a huge amount of data with the ultimate goal of evaluating managerial performances based
on the value that each individual customer brings to the firm. In order to record and quan-
tify those evaluations, managers need a set of indicators that measure customer values. Metrics
perform this role.
The benefits of developing and using metrics are significant to companies. Some of the key
benefits that accrue to the firm are
◾
Tighter control over business processes and CRM activities
◾
Means to measure changes in revenues, costs, and profits
◾
Benchmarks and targets to attain certain levels of performance
◾
Measures on return on investment (ROI)
◾
Aid in the acquisition and retention, preventing churn, and assisting win-back of profitable
customers
◾
Realigning marketing resources to maximize customer value
There are two broad categories of metrics, brand-level and customer-level. Brand-level metrics are
metrics that measure the brand's competitiveness in the market, such as market share, customer
equity, sales growth, and so on. Customer-level metrics break down those brand-level metrics to
the individual customer, such as acquisition cost per customer, size of wallet, and so on. A com-
bination of brand-level and customer-level metrics gives managers a complete picture of how the
