Database Reference
In-Depth Information
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Observe shifts in CV that reflect changes in customer behavior.
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Identify the gap between the current value and potential value, that is, the value gap to drive
targeted cross sell/up-sell campaigns as well as measure improvements in CV.
◾
Ensure that the scarce financial and staff resources are allocated to interactions with those
customers with the largest proven CV or potential CV.
Any business initiative can be assessed in terms of how much it contributes in increasing the
CV versus the costs involved. But CVM is more than just a new method for calculating the
value of customer relationship or a new way that a business allocates marketing resources and
efforts. It is a total marketing system that entails the need to build organizations, processes, and
performance measures that work together to maximize the value of the customer capital. In
contrast with the traditional brand management approaches that focus primarily on the brand
equity, CVM treats customer capital as the primary marketing asset. Figure 1.9 compares the
features of these two approaches. Whereas the traditional mass marketing and tactics revolve
around segmentation, targeting, and positioning, CVM is driven by acquisition, retention, and
add-on selling model. In the case of CVM, the marketing mix is determined by the stage of the
customer life cycle (CLC) (Figure 1.10).
Mass customization of products and services enables companies to market
of
-
the
-
shelf
prod-
ucts and services as tailored to the individual customers. This reduces the need for standard
offerings and their associated carrying costs. However, this is possible only if the vendor has an
accurate profile of the individual customer; a good CRM program will generate and maintain
this kind of information. Building such a profile also facilitates cross selling of products and
services through the different delivery channels available, adding incremental revenues. It can
also reduce time to market new products as potential latent demand can be quickly identified
and addressed.
Customer Capital Approach
Brand Equity Approach
Product and service quality
Create strong customer
preference
Create high customer
retention
Advertising
Create brand image and
position
Create customer affinity
Promotions
Deplete brand equity
Generate repeat buying and
enhance customer lifetime
value
Product development
Use brand extensions to
sell related products
Use relationships to sell
other products
Segmentation
Based on customer
characteristics and
benefits
Based on observed customer
buying behavior
Direct distribution to
customer
Enhance customer affinity
Channels of distribution
Multistage distribution
system
Customer service
Enhance brand image
Figure 1.10
Comparative features of the customer capital and brand equity approaches.
