You need to know what a customer is worth to you on so you can figure out if you can spend more in marketing to acquire more ideal customers. In another article we discussed Cost of Acquisition for a customer, and if your cost of acquisition fits well inside your overall customer profit then you can continue to spend on that acquisition strategy. If your cost to acquire is too high based upon your customer lifetime value then you are spending too much in acquisition. The best marketing campaigns acquire your ideal customers, and they are the ones with a high lifetime value to you that you actually like working with.

1. Economics of CRM

2. Marketing Practices
● Product Centric
○ mass marketing, production, communication & distribution
○ USP and brand image
● Segment Centric:
○ Mass marketing was no longer effective
○ Focus on customer segments by Business
○ Segmentation, Targeting and Positioning
● Customer Centric
○ Developing strategies centered around customers
○ Micro or a niche segment of one customer
2

3. Various Ratios / Values
Market Share : Market share is the percent of total sales in an industry generated by a particular company. Market
share is calculated by taking the company's sales over the period and dividing it by the total sales of the industry
over the same period.
Wallet Share : refers to how much of a customer's expenses for a category of product or service goes to a
particular company.
Customer Lifetime Value : Customer lifetime value (CLV) is one of the key stats likely to be tracked as part of a
customer experience program. CLV is a measurement of how valuable a customer is to your company with an
unlimited time span as opposed to just the first purchase. This metric helps you understand a reasonable cost per
acquisition.
Activity based costing : (ABC) is a budgeting and analysis process, which evaluates overhead and operating
expenses by linking costs to customers, services and products. ABC is used by managers to determine the actual
cost of serving a customer and hence assess customer profitability.
3

4. Lifetime Value (LTV) Detailing
Introduction
Life time Value Calculation : Product, Services
Loyalty & Profitability
CLV Graph : https://businessgrowthguys.com/customer-lifetime-value/
Markov Analysis : Brief intro of concept
CRM Calibration / Analysis
4

5. Activity based Costing
Activity-based costing (ABC) is a costing method that identifies activities in an organization and assigns
the cost of each activity to all products and services according to the actual consumption by each.
Therefore this model assigns more indirect costs (overhead) into direct costs compared to conventional
costing.
With ABC, a company can soundly estimate the cost elements of entire products, activities and services,
that may help inform a company's decision to either:
Identify and eliminate those products and services that are unprofitable and lower the prices of those that
are overpriced (product and service portfolio aim), or
Identify and eliminate production or service processes which are ineffective, and allocate processing
concepts that lead to the very same product at a better yield (process re-engineering aim)
5

6. Cost to Serve Customers
Fixed , Variable, Overhead Cost
Activity based costing to identify the actual cost of serving customers. : high cost
to serve customers and low cost to serve customers.
High Cost : Order customised products, small qty, unpredictable order loading,
customised delivery, High DSO, presale, post sale support, inventory issues
Low Cost : Order std products, High order qty, Predictable ordering, standard
delivery, Pay on time, Neglible presales, post sales support
Customer Equity : Value,Brand, Relationship
6