Page 116 - BA1 Integrated Workbook STUDENT 2018
P. 116
Chapter 11
3.3 Managing the ongoing relationship with customers
Customer relationship management
This is a method used by the organisation to track and organise its
contacts with current and prospective customers.
It will involve building a strong relationship with customers as well as
gathering, storing and sharing information, typically using information
systems.
Customer account profitability (CAP)
CAP is an analysis of all the revenue streams and service costs
associated with specific customers or customer groups.
The typical stages of CAP are:
analyse the customer base and divide it into segments
calculate the annual revenues earned from each segment
calculate the annual costs of servicing the segment
identify and retain the quality customers
eliminate or re-engineer the unprofitable customer groups.
Customer lifetime value (CLV) analysis
CLV is the present value of future cash flows attributed to the
customer relationship.
In theory CLV represents exactly how much each customer is worth in
monetary terms and therefore how much the marketing department should
be willing to spend to acquire/retain each customer.
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