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Religence Frequently
Asked Questions (FAQs)
3.
How can Relationship Value be used?
By
measuring the progress in developing the customer relationship,
Relationship Value becomes a Key Performance Indicator and a leading
indicator for profit. Relationship Value has immediate, practical,
relevant benefit in eight ways:
- Relationship Value gives a benchmark to measure against for movement
through the customer relationship. Relationship Value is a variable
used to understand at a glance how the individual customer arrived
at the current position, and what could be done next.
- Relationship Value summarizes interaction effectiveness and can
be used to allay confidentiality concerns in working with distributors,
agents, or other sales organizations. The depth of the relationships
being built can be shared, without sharing the contact information
or the details of the interactions at the individual relationship
level.
- Relationship Value gives a benchmark to compare market segments.
- Relationship Value can be used to correlate to patterns that
lead to events that affect profit, such as referrals, increased
purchases, or unhappy customers. Relationship Value is a guide for
looking at an individual, unique customer in order to compare and
contrast progress with that one person to the aggregate. From an
operational point of view, this is a huge improvement in understanding
profit potential. Instead of increasing sales haphazardly, with
Relationship Value, companies can focus on increasing high-profit
revenue, which requires the cooperation of cross-functional teams.
- Relationship Value creates the patterns that lead to understanding
profitable customer segments, and allows those segments to be compared
and contrasted with different levels of profitability.
It supports the many ways to segment for profitability including
correlating the most profitable customers with the most profitable
products in terms of total contribution to profit using Activity-Based
Costing; examining the most satisfied customers, or those who advocate
or promote the company; mining for those who bought most recently,
most frequently, and who make the largest purchases, or Recency,
Frequency, Monetary (RFM) analysis; considering CLV, the potential
future profits expected from customers; or comparing customers'
CLV with their contribution to profit to date.
- Relationship Value can be used to discover the prospect and customer
patterns set by a company's best performers in marketing, sales,
and customer retention functions.
- Relationship Value can also be optimized for profit. Because
every interaction now has a measurable value, disparate interactions
of equal value could potentially be interchanged.
- Relationship Value helps quantify "goodwill," the value
of a company over and above its total book value. Relationship Value, as a key performance indicator for relationship development and
as a leading indicator for profit and customer satisfaction, provides
a justifiable approach to the soundness of the company's relationships.
For more about Relationship Value, please see What is the context
for customer relationship metrics? Or take a look at Chapter Four
in our CEO's new book Customer Relationship Intelligence: A Breakthrough Way to Measure
and Manage Sales and Marketing.
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