Last week, I had the opportunity to travel to Toronto with Steve Walker and Pat Gibbons to talk with a healthcare company about their customer strategies. We talked about how customer relationships have two sides. And, how many organizations spend significant time and resources on understanding what customers want and what customers value, but they often lack the tools needed to evaluate the value they receive from their customers.
A couple years ago, Mark Walker, a colleague from Walker Information, developed a tool called Value Map. The purpose of the value map is to plot the mutual value of customer relationships – mutual value being the value customers receive from the products and services they purchase and the value companies receive from their customers. Its application is to build customer strategies that are aligned with business objectives and to allocate the appropriate resources to maximize the outcome of those strategies.
When we talk with companies about the value map we often learn that they have metrics that are used to determine the value of a customer. However, these metrics tend to be short sided and misaligned with the vision of the company. For example, many organizations value customers based on revenue. This metric alone does not provide all of the necessary information that one needs. For example, it does not indicate whether or not the relationship is profitable. Nor, does it indicate if there is opportunity for additional revenue.
Instead of looking soley at revenue or another financial indicator to determine the value of a customer, we recommend expanding the perspective and looking at 3Ps – Payoff, Potential, and Partnership. By understanding the 3Ps for each key customer relationship, organizations can align the appropriate resources and build customer strategies to enable their success with customers.
What do you think? What should be considered when determining the value of a customer?
Note: This post was originally published in Customer Connection on 12/11/2008.