Determine Customer Value

Determine Customer Value - Complete Controller

You have a critical figure showing how important and valuable a customer is to your company with customer value and lifetime value. The deal allows you to divide customers into groups and edit them differently. In this chapter, you will read how to measure and calculate customer and lifetime value.

An essential purpose of customer observation and the analysis of buying behavior and customer behavior is to differentiate customers and divide them into groups (customer segmentation). You shouldn’t lump all customers together because the customer analysis will always show considerable differences in the requirements. Customers show different preferences, preferences, and desires. Other target groups can be derived from this. Download A Free Financial Toolkit

Customer Loyalty and Customer Value as Customer Characteristics

Another distinguishing feature of the target groups is the importance customers can have for your company. The meaning comes from several factors. Customer loyalty is an essential factor. Some customers buy for the first time – or are about to do so; that can be the start of customer loyalty. Other customers occasionally buy, again and again, or regularly. And other customers are regular customers or buy exclusively from your company.

Finally, the importance of the customer can be expressed in a comprehensive indicator: customer value. Recently, it has become a central control variable for customer relationships and customs processing. Economic and qualitative factors flow into the customer value. Since customers can have very different customer values, it is also a characteristic of differentiating, differentiating, and segmenting customers.

Goals of Analyzing Customer Value and Customer Lifetime Value

This analysis aims to identify and retain “good customers” while “bad customers” can migrate or even be sorted out. Value is how the structure of the customer base is to be improved. Important customers get more attention, and less essential customers can be looked after with less effort. Individual, harmful customers can be abandoned. In addition, the results of customer value analysis can help. CorpNet. Start A New Business Now

  • The acquisition of new customers does not occur “at any price.”
  • The customer orientation is differentiated into different customer groups
  • The meaning of special requests can be better assessed
  • Customer loyalty programs are not designed according to the watering can principle
  • Success-based remuneration systems for field staff can be developed in a targeted manner.

Factors Defining Customer Value

The customer value is made up of several factors and parameters, some of which can be measured, but some of which can only be qualitatively estimated and expressed using a point value:

Monetary Customer Value

Revenue from a customer less the cost of the customer; this results in customer contribution margin or profit with this customer.

Customer Potential

Possible sales could be achieved with this customer as a whole but have not yet been completed because the customer still has to grow or because he covers a (large) part of his needs with the competitor. Then, the so-called share of the wallet could be increased.

Cross-Selling or Up-Selling Value

Generating more sales with customers in other product ranges or business areas is possible.

Communicative and Acquisitive Customer Value

Image effect as a reference customer, multiplier effect through the customer’s recommendations and word of mouth.

Informational Customer Value

Information for the development of products, pilot customers or lead users, and information about opening new markets. Complete Controller. America’s Bookkeeping Experts

The customer value results from the sum of these individual values and factors over the entire duration of the cooperation; the so-called customer lifetime value results during the customer life (customer life cycle). For example, sales or costs per year are added up over the years in which cooperation exists or can be reactivated.

Customer Lifetime Value (CLV)

The Customer Lifetime Value (CLV) means sales and costs that a customer incurs as long as he is a customer; Revenues generated monthly, annually, etc., during his customer time are summed up and discounted based on a target return. On the other hand, costs for one-off and first-time customer acquisition for ongoing campaigns for customer loyalty or customer separation are kept.

Methods of Determining Customer Value

The factors used to calculate a customer value must be individually measured or measured. It is necessary to check how the factor or indicator is expressed, which key figure represents it, and which key statistics the company can determine from sources. Therefore, different methods are used for the analysis of customer value, such as:

  • Customer profitability, sales, contribution margin, or profit, which is achieved with the customer, results from the sales controlling data and the accounting (accounts receivable management).
  • Analysis of the turnover that is or can be achieved with specific customers with the ABC analysis.
  • Scoring models: According to a defined procedure, the customer is awarded points for his services as a reference customer, recommendation customer, multiplier, and source of ideas or development partner for your company.
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