Customer Value and Customer Experience thoughts

28th Aug 2014

Michael Lowenstein wrote a good blog post on Customer Think about segmentation, churn modelling, loyalty and more. Starting a 'brief' comment, I expanded into further thoughts on Lifetime Value models, predictive Churn, promoter scores (net or otherwise :) and the big interest in Customer Experience... I think it merits a separate post, so here it is:

I am surprised how much the interest and use of good old Customer Value has declined within many companies in recent years. The justified attention to Customer Experience does not, in any way, eliminate the importance of understanding and managing Customer Value, and optimising resources by appropriate allocation.

Similarly, Churn and its prediction are seen totally separately from Customer Lifetime Value and despite some advanced modelling, many fail to realise that churn propensity is a direct component of the lifetime value. Loyalty (or indirect proxies for it like recommendation scores) is also measured and managed separately, owned by different silos and disconnected from Customer Value (and often even from Churn management).
Isn’t it blindingly clear that these concepts – and metrics – are inseparably connected and are best viewed in a single picture, ideally measured and managed together by closely coordinated (or even the same) teams?
Ideally Churn analytics should be integrated with LTV (CLV) models, e.g. a Churn score can be a computed variable or vector as one of the inputs in the Value model. Similarly, any Recommendation score(s) (preferably based on observed behaviour rather than self-declared propensity) can also be input variables in the Value model. Lower churn risk increases projected lifetime, and recommendations (real not stated intent) add value. It looks so logical to me, yet I meet many accomplished business leaders who don’t seem to grasp such logic…
Needless to say, any effort to measure or improve Customer Experience that does not account for the Value drivers buried within perceived experiences – is doomed to remain a nice icing on a missing cake. Lip service with no impact on Shareholder Value.
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