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Updated: April 21, 2014 21:48 IST

How to identify profitable customers and retain them

R. Devarajan
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PROFITABLE CUSTOMER ENGAGEMENT: — Concept, Metrics and Strategies: V. Kumar; Sage Publications India Pvt. Ltd., B 1/I-1, Mohan Cooperative Industrial Area, Mathura Road, New Delhi-110044. Rs. 795.
PROFITABLE CUSTOMER ENGAGEMENT: — Concept, Metrics and Strategies: V. Kumar; Sage Publications India Pvt. Ltd., B 1/I-1, Mohan Cooperative Industrial Area, Mathura Road, New Delhi-110044. Rs. 795.

Consumer’s sovereignty is a central principle in the operation of the free market economy, wherein the will and want of the customer rule the roost. Mahatma Gandhi famously wrote: “A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favour by serving him. He is doing us a favour by giving us an opportunity to do so.”

Until the last decade of the last century, marketing had been one of the neglected functions in management; it was always taken for granted in the Indian business scenario. The main reason for this was the then national policy such as protected commercial environment, tariff walls, and a fetish for nationalisation masquerading as economic patriotism. Ever since the 1990s, however, the climate has changed.

We are, now, witnessing not only a transformation in the purchasing posture and pattern of the customers, but also consequent corporate strategies in response to such customer expectations. The time has arrived when companies want to manage their revenue and profit such that they are marketing-focussed, and not sales-centred. Selling is more attuned to the needs of the company, whereas marketing is more concerned with the needs of the customer.

In the current context, customer relations management comes into its own and has become a top priority with corporate organisations. The future will put even more pressure on the need to create an awareness of, and sensitivity to, the expectations of the customer. Customer delight — “kokayaku manzoku” as the Japanese aver always — is a core and crucial item in the agenda for achieving sustained success in the business world.

Customer relations management is the Holy Grail in the present dog-eat-dog competitive climate in the international economy. It is a strategy employed to ascertain more information about customer needs and behaviour. Further, it is a compass to navigate ways and means to build stronger connectivity with customers based on such inputs. Good customer relationships are at the heart of any successful business venture. A better understanding of the needs of a customer is sine qua non for a company to respond to such needs in a positive way and ensure ‘Profitable Customer Engagement’.

Companies which want to be winners, which can ill afford to stay as spectators and bystanders, and hence, need to go beyond just copybook techniques in manufacturing and marketing, must intensify their involvement and engagement with their premium customers and generate enduring relationships with them.

Value addition is an important ingredient for winning this game. The new role of marketing management is to build a much deeper and broader definition of customer value pari passu nurture customer relationship by aligning the core processes in the company with this goalpost. The ultimate objective of customer relations management is to optimise the present and future value of the customers to the company.

“Profit can only be created by providing something that a customer accepts as value, and is willing to pay for as such. What the customer sees, thinks, believes, and wants at any given time determines whether value is being created.” (Peter Drucker)

The book under notice brings out in a clear and concrete fashion the various ways by which a company can identify profitable customers; and even more important, it explicates in detail how to retain such customers by inculcating in them a sense of ownership so that they participate in producing what they are purchasing.

The book further mentions some concepts and methods to measure customer engagement by introducing a framework that proposes five metrics viz., Customer Brand Value, Customer Lifetime Value, Customer Referral Value, Customer Influence value, and Customer Knowledge value.

Brand Value is a set of associations — thoughts, feelings, perceptions, images, and experiences — that customers relate with the brand. Lifetime Value is an index that enables the computation of the monetary value in respect of the long-term relationship with customers. Referral Value is the quantitative measure of the recommendations that an existing customer provides to prospective customers with reference to a particular product. Influence Value is the impact on the profitability of a company based on what the current customers consider as good and great, and transmit their opinions to others.

Knowledge value is a significant input to a company, because based on the customer feedback, it can reduce the failure rate of its products.

The remarkable feature of this book is the vast extent of research study that the author has undertaken, which is evident from the fact that there are no less than 113 graphics, both illustrative and illuminative, in a volume comprising just 298 pages. By the same token, the book is replete with abbreviations galore and liberal usage of jargon that rob its readability. At the end of the day, however, the book may be of immense use, perhaps, to the specific target audience that the author has in mind.

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