How Data Can Lead To More Profitable Customer Relationships

Anja Reschke

Woman talking to clerk at paint storeThese days – thanks to research, Big Data, and social media – companies can create detailed profiles of their customers much more easily than they could in the past.

This can help tremendously to reveal customer behavior, and can to some degree predict future customer behavior. The ability to predict customer needs is a powerful tool for engagement, and it can improve the overall customer experience, which can help build customer relationships.

Developing profitable customer relationships is the focus of a recent article by Ernst & Young (EY), called Customer Lifetime Profitability (CLP). With the CLP model, a company measures the underlying profit of an existing customer base and considers the future revenues and costs for the lifetime of the customer. The goal of CLP is to develop long-term, high-profit customer relationships.

Data is the foundation of customer lifetime profitability (CLP)

Data can give you more insight into your customer base. When you understand your customers, you have the ability to make more informed decisions in order to serve your customers better.

Many organizations are not using data to its full potential and don’t have an accurate measure of which customers are profitable and which ones are not.

To help address that, EY says companies need to evolve their existing systems and practices in order to capitalize on CLP. Here’s how:

  1. Improve your customer relationship management (CRM) systems.  Ensure you have the ability to collect and analyze customer data in order to understand your customers at a very detailed level.
  1. Identify the most profitable and least profitable customers.  Focus on each type of customer in a different way in order to nurture and grow the customer relationship.
  1. Take a collaborative approach to customer service across the entire organization. Improve the company’s attitude toward its customers, and take a shared focus on the customer across the organization.

A unified approach to customer engagement

By taking a comprehensive and holistic view to ensure customer strategy is company-wide, customer interactions will be consistent over multiple channels with a unified customer strategy and approach. It’s vital that all customer touch points are in sync. If there is a disconnect between the customer service message and its delivery across the organization, the strategy will fail.

More customers are moving to social media for customer service, so this area must be supported in the unified customer approach in order to achieve customer lifetime profitability. Many organizations still don’t appreciate how important these social networks have become to their customers. Social media is also a good way to collect customer data, and it is an important customer service channel that has a significant impact on CLP.

Businesses that succeed with customer lifetime profitability and use data to truly understand their customers from a regional, functional, and attitude level have the ability to develop new products and services that deliver tangible benefits to those customers, which will ultimately benefit the business for years to come. 

This information was based on the EY article, “Customer Lifetime Profitability: How to grow and manage your best customers.” Ernst & Young Copyright © 2015.

For more information about data and the changing customer experience, download the SAP eBook, Digital Disruption: How Digital Technology is Transforming Our World.

For an in-depth look at how the digital era is changing the business landscape, download the SAP eBook, The Digital Economy: Reinventing the Business World.

Learn more about The Battle For Customer Engagement: How the ‘Internet of Me’ is Changing All the Rules and Maximizing B2B Buyer Satisfaction: 6 Things You Should Know.

Discover how to Boost Profits And Lower Costs By Focusing On This One Thing.

 


About Anja Reschke

Anja Reschke is the Senior Director of Strategic Ecosystem Marketing at SAP. She is responsible for the development of joint strategic marketing plans, programs, and activities, with global strategic services and technology partners.