Acquisition, Retention, and Development

University of BernInstitute of Marketing and Management Department of

Management and Entrepreneurship

Ruedi Beck, Sabine Bernhard, Nadia Hauswirth, Sabine Hosennen

16.11.2010 1

Not every customer is profitable!

Econimic value of an individual customer:Present value of cash flows generatet by that indivual minus costs of acquiring, retenting and developing that customer

16.11.2010 2

How to improve the customer profitability:◦ Stop doing business with people who persinstenly

generate losses◦ Develop an economically sound plan for moving

modestly profitable customers into the high-profit sector

◦ Create a plan for retaining customers in the profitable sectors and developing their economic value still further

16.11.2010 3

Quantify defection What‘s the present value of the average customer? How much do we lose?

Locate the epicenter of defection In which areas are the most defections? Which group of customers defects the most?

Learn from defectors and the dissatisfied What was the reason for defection? eliminate it!

Neutralize the causes of defection Don‘t disappoint, keep the price reasonable, maintain in

dialogue, surprise and delight

16.11.2010 4

Expand the amount of profitable business with existing customers

Cross-selling Vertical integration Diversification

For example you can examine the customers value chain of activities and determine which links in the chain you can profitably serve

16.11.2010 5

Not every customer is profitable Focus your recources on acquiring and

retenting profitable customers Identify the reasons of defection of

profitable customers eliminate them Try to gain a greater share of the wallet of

the profitable customers Invest the money you saved by dropping

unprofitable customers in rententing and developing the profitable ones

16.11.2010 6