The 4Gotten Value of Customers

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As the Telecommunications industry matures, the definition of Value is evolving with it. Here are 4 areas of Value that, outside the direct price a customer pays for Products & Services, are most often forgotten.

  1. Cost. There is no clear value if cost is not considered. For example, if a customer pays 20 EUR per month and calls the call center everyday, his value to the business will be lower than a customer that pays the same 20 EUR per month, but does not call ever the call center. The cost to serve becomes important to determine the value of each customer. Also, a customer that abuses unlimited services has a completely different value when compared to a customer that stays well within a normal usage, due to interconnection variable costs associated with usage.
  2. Life-time. The value of a customer is proportional to the time he stays as a customer. Thus a customers that initially gives a very high revenue and soon leaves to competition has a much lower value than a customer that is loyal to a company and stays for years. The longer a customer stays, the more valuable he is. This is also known as Customer Life-Time Value (CLTV).
  3. Reach. The value of a customer cannot be isolated from the influence he/she generates within his network. For example, a customer can be a decision-maker in the purchasing process for other customers, or he can be an influencer. The idea of “advocate” is important to understand the value of customers. Customers that glue other customers around an idea or a brand are extremely valuable to businesses. The weight of Social Media is also enlarging this phenomena. The value that a customer generates by spending 20 EUR per month but openly criticizing a company’s products & services in Social Media is completely different than a customer that will speak positively about the company. These comments will influence other purchasing decisions from the direct and indirect network of the customer. And this represents “value”.
  4. Potential. A customer value must also take into consideration the potential beyond the present value. For example, in business valuations, a customer base that is under their true potential has a higher value than one that is at their maximum potential. A customer’s potential can be influenced by effects such as maturity stage, disposable income or elasticity.

(LinkedIn)

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