Database Reference
In-Depth Information
table 15.1 (
Continued
)
Brand and Customer Level Metrics
Metric
Definition
Use of Metric
Past customer
value
The gross contribution of a customer when
adjusted for the time value of money
Customer-level
RFM value
RFM stands for Recency, Frequency, and
Monetary value:
• Recency indicates the most recent purchase
date of a customer
• Frequency measures how often a customer
purchases from the firm
• Monetary value measures the average per
transaction spending of a customer
Customer-level
Customer
lifetime value
The total discounted contribution margins of a
customer (excess of recurring revenues over
recurring costs to the focal firm) over a specific
time period
Customer-level
Customer equity
The total lifetime value of all customers of the
focal firm
Brand-level
Table 15.1 lists the various metrics used either at the brand or customer level.
Given the multiplicity of dependencies and influencing factors, the selection of the right mea-
sures is a complex task. There is a need for a framework under which multiple measures are inte-
grated and related to each other so that a set of measurements should not be perceived to be
in opposition to others. Moreover, there is also a need to have the right balance between the
financial and nonfinancial measures, which is the focus of the section on The Performance Prism
(see Section 15.6 “Performance Prism”).
15.9 Summary
This chapter introduced the perspectives on the value created by an enterprise from the point of
view of its five major stakeholders, namely, customers, investors, vendors, managers, and employees.
This generated value can be monitored and managed in terms of the measures of performances
characterizing the operations of the company. At the end of the chapter, we looked at a sample list
of improvements in measures of performances (MOPs) that have been achieved in various compa-
nies by the implementation of SAP CRM.
