Current value, historical value, present value, lifetime value....

One of the more interesting aspects of customer value measurement - the precedent to customer value management - is that it can have so many different temporal definitions. There is a vast difference between each of these terms:
  • customer current value
  • customer historical value
  • customer present value
  • customer lifetime value
 and even within those terms there are variants in meaning. For example current value may mean last week | month | year or it may mean the value of the customer's current business over the next week | month | year.

Getting basic definitions right is crucial to successful acceptance of your customer value measurement techniques. Each of the value metrics identified above has validity - there is no one right answer or single version of the truth that everyone seeks. The reality of customer value measurement is that the techniques and policies used to define the metric must be tailored to the decisions that are to be based on this information.

For pricing decisions one set of definitions might be ideal, while for customer retention strategy another might be more applicable. You need to get the relationship between definitions and decisions right if you want to encourage the right behaviour...and that is what it is really all about.

- David McNab


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Dave McNab's BAI Blog

Management consulting insights from Objective Business Services Inc.