How to Differentiate Customers - Essay Example

How to Differentiate Customers Introduction Intelligent businesses need to evaluate the client base they are having and the kind of weight given to each and every customer. This calls for the differentiation of customers where businesses should know the net value of each and every one of them. This paper will be discussing extensively on the differentiation aspects and what would be the parameters from which the organization would have a better idea of the return on investment against each and every customer pockets they have. Customer Differentiation Customer differentiation is not limited to only the net revenue each and every customer brings in a quarter or a year but on a range of parameters which calculates the growth potential, net worth, returning customer base, ongoing business, current relationship and references obtained from the customer. The tabular format below will give an insight into the various parameters associated with the client with emphasis on the weight associated with each and every category. Index Parameter Measures Weight Average Revenue Score Current spend and the projected spending 20 Revenue Change Score Changes in annual revenue 25 Current Relationship Tenure; Contract Commitment 15 Technology Entanglement System; Reporting mechanism; Email; Tele-Web 20 Share of Client Outsourcing 10 Partnership Communication and contact level; Referencing; Future value projection 10 Table 1: Customer Valuation Model [based on Exhibit 5.4] Average Revenue: Businesses need to evaluate the average revenue earned over a period of time. From the accounts perspective, the management needs to check what is the current spending of the customer and what would be the projected revenue. Based on it the average revenue against a customer needs to be calculated. If average revenue is good or is very good then definitely the business should spend more time on the customer. Revenue Change Score: The annual changes in revenue are given the maximum weight where the management can analyze and comprehend the percentage change over the last fiscal years with the current year. The analysts need to study the increase / decrease in revenue to get the change graph. The analysts also need to forecast future revenue change based on current market scenario, customer relationship and other internal and external factors. Lewis (2005) stated that firms should identify their profitable customers and strategically plan their marketing based on customer asset value. He also specified that the forecasting of the future value of customers is of paramount importance. The management can decide which customers should be allocated more time due to current net worth and prediction of future net worth. Current Relationship: The current relationship with the customer plays an important role in identifying the various parameters related to current revenue and future revenue projections. Customer relationship remains at the core of the entire business where a transparent, flexible and service orientation relation helps in gaining customer satisfaction. Reliability and confidence build up are important in ensuring future revenue and growth of the company. Conflict management should reduce any communication errors and help the firm project its growth plan. Technology Entanglement: Technology plays yet another important role in customer relationship management. Proper reporting, web conferencing and email management helps in communicating with the client. Log maintenance helps reduce communication issues. System integration helps the management in knowing what value additions are given to the customer and vice versa. This helps the organization to differentiate between the various customers and their net worth to the organization. Share of client: The share of outsourced work needs to be evaluated for the customer. There are a lot of instances where outsourcing is required and the business should assess it. Partnership: There needs to be a constant partnership with the customer with communication being a vital aspect of it. Constant contact and communication level will result in future references being given by the customers. The referencing factor and additional jobs from existing customers would ensure the future value brought in through these customers adding to the valuation. How would the information from these tables help you decide how to spend your time? The answer to the above question whether more time should be allocated to the customers or not depends on the value addition and net worth of the customers. To have a detailed analysis, the business analysts need to study each and every segment of the business where there is a financial contribution by the customers. However it is not always true that financial considerations are the only vital aspect to such a differentiation analysis. The customer valuation model in the table specifies the other factors which help a business understand the net worth of the customers and how they give value addition to the business. These are the areas which are not shown in the profit and loss statement or the balance sheet of the company but are reflected in its net valuation to the business. The long term relationship with the customers can bear fruit by the kind of references and the word of mouth marketing has done in lieu of the prolonged business relation. In this global arena of business Information and Communication Technology has evolved to be an extremely valuable tool. Communication still remains a vital aspect to the success of any organization. Technology tools available in this internet dominated business world have made things a lot easier than yesteryears with people able to communicate well in a matter of a few seconds. Live chats, audio and video conferencing, instant messengers, emails have all contributed to a faster, efficient and better world. All these factors helps the business in reducing time and spend more quality time with the customers who matter the most and businesses have the reporting tools to substantiate their judgment. The company also needs to analyze the customer base, understand their net valuation to the business and make future projections to ensure that they gain maximum leverage from existing customers. The market dynamics are the external factors which the management needs to analyze and clubbed with the existing customer differentiation analysis, the business can make a strategic marketing decision. What else would you need to know? Peppers and Rogers (2011) were of the view that the interactive era of the twenty first century has brought a see-saw change in which business were perceived with firms gaining a strategic advantage through the knowledge they acquire about their customers. Organizations are thriving on a two way brand, one is interaction and the other customer information. These tools help the customers in gaining a competitive advantage of knowing their customers as well as maintaining interaction with them. The businesses understand the needs and preferences of the customers through these interactive sessions which help them in planning future business strategies. The other important aspect of the new age marketing strategy has to do a lot with direct marketing where the internet has provided the platform for the companies to get in direct contact with the customers. These have made the calculations and the derivations much easier for marketers to assess the net worth of customers and differentiate them into the much valued Customers category or the less valued customers. The potentiality of these customer bases are evaluated which helps in better decision making. References: Peppers,D. & Rogers,M. (2011). Managing Customer Relationship. John Wiley & Sons Lewis,M. (2005). Journal of Marketing.Pg230. American Marketing Association Read More