ebook: customer lifetime potential
DESCRIPTION
A new measure is emerging to help B2B organizations answer this question – Customer Lifetime Potential (CLP). Businesses that measure, and more importantly, maximize the lifetime potential of their customers have a distinct competitive advantage over those who do not. In today’s increasingly global and competitive marketplace, customers have more options available to them than ever before. Strengthening customer relationships is imperative for business success for one simple reason: Loyal, long-term customers drive profits.TRANSCRIPT
Make Your Numbers™ ©2013 Zilliant Incorporated, All Rights Reserved Worldwide
Measure and Deliver Maximum Profitability
With over 20 years of experience, Penny has
worked closely with sales organizations to align
revenue and product objectives with market
needs. She has defined, developed and executed
global marketing and product initiatives for
manufacturing and distribution companies
enabling sales teams with tools and programs to
exceed market and corporate expectations.
©2013 Zilliant Incorporated, All Rights Reserved Worldwide
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Penny J. Merian
Director of Product Marketing
Table of Contents A. New Measure of B2B Sales B. CLP is Not a One-time Assessment C. Why Should I Care D. Growth Strategies E. Transforming Potential into Hard Dollars F. Using Science to Drive CLP G. Customer Relationships Grow or Shrink H. Maximizing CLP I. Value Imperatives and Measures J. From Insight to Foresight K. Power of Science to the Art of Selling
Customer Lifetime Value (CLV) is used to calculate the lifetime value of a new
prospect to determine if the acquisition costs outweigh the overall value that the
prospect will deliver. In other words, it measures the profitability of customer
acquisitions.
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What about after you acquire the customer –
how do you measure the value of the ongoing
relationship as a function of wallet share?
Customer Lifetime Potential (CLP) is a customer’s potential monetary worth relative to the expansion in breadth and depth of the relationship over time. CLP is a powerful business metric that helps drive what a customer will do – not just a forward-looking indicator. It is a guide for account executives to focus where it will pay the largest dividends.
It is a continuous ‘what else?’ indicator of a customer’s potential to maintain and
increase spend – known as “Performance to Potential”. It is a strategy for holistic sales
penetration by answering these questions:
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Businesses that measure, and more importantly, maximize CLP have a distinct
competitive advantage. In today’s increasingly competitive marketplace, customers have
more options available to them than ever before.
• How has a customer’s spend changed over the past quarter?
• How much of the change is within new versus existing
product categories?
• What level of spend should be expected and could be
achieved next quarter?
• What “potential trajectories” will continue to grow a
customer’s spend?
• What customers are beginning to defect or spending less in
specific categories?
• What customers should I target for specific programs?
A recent study by Bain and Company found that it is six to seven times more costly to
acquire a new customer than to retain an existing one.
Given your customers are of such strategic importance, your program to maximize
CLP and more importantly, extend this way of thinking throughout your sales process is
critical to maximize the value of your customer base.
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6 to 7 50% 95% Number of times more costly it is to acquire a
new customer than retain an existing one
Amount customer attrition if left dormant
over a 5-year period
Amount of increased profits that can come
from boosting customer retention by as little as 5
percent
Going beyond your initial efforts to
acquire new customers and focusing on
identifying and retaining profitable
customers to increase their value over
time requires the anticipating customer
needs and presenting attractive offers in
the right way, at the right time.
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What is your strategy for growing
revenue this year? • Acquire new customers, or
• Grow your existing customer base
For most B2B companies, it’s the latter,
which makes customers – not products –
your company’s most valuable asset.
Products and services may be easy for a
competitor to copy, but a company that
excels at creating customer loyalty is less
vulnerable to competitive attacks or
customer defection.
You’re either growing or dying! ”
“ Anonymous
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Customers buy when the perceived value-to-price ratio of your
product or service is greater than other alternatives.
1. Establish Potential (CLP Index
goal). Growing existing customer value, cost
effectively and efficiently, requires a focus on
cultivating your relationship and tailoring
your outreach to their specific needs. For
companies with large product catalogs and
customer bases, this is a complicated
process, requiring a unique approach to:
• Understand buying patterns of your
best customers, beyond traditional
segmentation
• Proactively offer the right products for
cross-sell and upsell opportunities
• Have strategic and profitable
conversations
2. Reverse the churn. Customers
don’t typically make a snap decision to
stop buying a product. They gradually
stop buying over time. By recognizing the
patterns that lead to customer churn
early, you can take proactive and
preventative measures to stop defections
before it’s too late.
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To establish a sales culture focused on “Potential to
Performance” that utilizes CLP to extend long-term
value creation, you need to include steps one and two
discussed on the previous page.
By applying science and technology
to your transaction data, you can
deliver automated, predictive
guidance that focuses sales reps or
distributors on the customer
opportunities with the highest
probability for expansion and
growth, and retain existing
customers.
Companies with a deep understanding
of their customers can focus sales reps on
the highest potential growth opportunities.
Move beyond intuition and opinion to
predictive guidance to understand how to:
• Profitably grow revenue in every
customer tier
• Pinpoint cross-sell opportunities and
effective cross-sell rules
• Align sales territories through buying
pattern-based segmentation and demand
profiling
• Create targeted product programs
focused on the right set of customers
• Move customers along a potential
continuum by aligning demand creation
strategies with focused sales execution
initiatives
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Have your competitors ever raked in
profits from customers you failed to pay
attention to? This is a costly mistake.
Maximizing the lifetime potential of
your customer base is challenging, but
possible. Based on extensive experience
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It’s far more cost effective to grow
sales from existing customers than to
attract new ones.
In a recent IBM Global
Survey of CEOs,
getting closer
to the customer
ranked as the top
priority among
CEOs in
companies
that the survey
identified as
“standout” organizations.
with a wide range of
organizations, Zilliant
has identified Five
Value Imperatives that
comprise a customer’s
CLP Index Score.
Leading organizations
use these best practices
to maximize Customer
Lifetime Potential.
Value Imperatives Measurements
Maximize recurring revenue and look for new business within your customer base through targeted cross-sell and upsell offerings. Targeting programs to customer micro-segments which have a high propensity to buy based on similar spend is much more impactful.
• Customer growth rate • Number of products/
categories purchased • New product category spend
Customers respond to sales reps that truly understand their world. You can’t just outsell competition, you have to “out learn” them. But you need to do this as efficiently as possible, balancing selling time with research.
• Insight score (value of insightful conversations)
Proactively drive increased retention by identifying early indicators of competitive poaching and/or defection.
• Retention rate • Churn rate
Base your customer strategy on predictive purchasing profiles derived from past purchasing behavior, current behavior, product affinities and business segmentation.
• Purchase Pattern Profiling™ • CLP effect curves • Demand shaping
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©2013 Zilliant Incorporated, All Rights Reserved Worldwide
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Having a system support methodology to progress customers along the CLP
continuum, takes you from a product view to a framework of actionable information.
Maximizing CLP through sales force and/or distributor utilization will determine the
ultimate success of your company.
Global manufacturers and
distributors are constantly
looking for ways to make their
operations more agile, efficient and
profitable. Innovative companies are
applying that mindset to maximize
CLP for each customer across their
entire books of business.
Business success requires a new
depth of customer insight to efficiently
maximize CLP in a customer economy.
You are spending today on sales initiatives. If you
could increase your opportunity conversion rate 35-55
percent and increase customer loyalty for as little as
$1.40/day per sales representative, would you?
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It is possible to gain these insights using science to maximize
Customer Lifetime Potential and focus your sales reps on the best growth
opportunities
Contact Us Today
©2013 Zilliant Incorporated, All Rights Reserved Worldwide
Zilliant provides B2B companies with data-driven guidance, enabling smarter pricing and sales decisions to help businesses make their numbers. The Zilliant optimization platform uses advanced science in its price optimization applications to enable companies to overcome the massive complexity in their businesses. Our flexible SaaS model allows customers to quickly and confidently improve their financial performance by integrating into existing systems and processes. Learn more about how Zilliant helps companies price more profitably and sell more effectively at www.zilliant.com.
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