How Customer Value Management Drives Incremental Revenue for Organizations with Large Subscriber Base

The Banking and Telecommunications industry is growing more competitive with operators struggling to find paths to profitable growth; markets are increasingly becoming saturated; new customers are getting more expensive to acquire; and current customers are apt to leave (“churn out”) in their search for a better deal.

Customer Value Management

In terms of content development, logistics of travelling and the delivery of context sensitive content across 5 different markets; this was a remarkable achievement for Octave Analytics. The training was phased into 3 certifications – Bronze, Silver Certification and Gold with each certification having a different level of content sophistication, special travel requirement and different level of analytics expertise. Despite the different markets, the central theme of the training was Customer Value Management.

We believe that Customer Value Management (CVM) is a holistic way of evaluating individual customers in terms of their overall profitability, now and in the future. This capability covers customers at every stage of their relationship with a business, and should be considered to be telecom, financial industry, eCommerce, and integrated B2C companies.

Relying on a combination of tactics, including bonus and tailored customer rewards, pricing, predictive modeling and cross and up-selling campaigns, CVM has the potential to boost EBITDA (earnings before interest, taxes, depreciation, and amortization) as much as 15 percentage points among certain customer segments, which is no small amount for B2C operators.

CVM applies to businesses that seem to have reached a point of saturation in its ability to acquire new customers. Also, it is applicable to business operators who are increasing their customer base, and still have not been able to boost the profitability of the customers they do have. Similarly, replacing inactive customers by acquiring new customers only cost more and reduces Return On Investment (ROI) and extend the time it takes to recapture cost of acquiring the customers.

Before now, the B2C operator had a long-standing orientation toward boosting market share, increasing the number of customers, and thus focusing on “gross adds” but this is no longer working. In this case, stern regulatory oversight has even made it much more difficult this African giant. Hence, it is necessary to develop new ideas of exploiting its opportunities within its operating markets.

Our CVM techniques help companies analyze which customers are the most valuable, and why. Indeed, this approach is a key capability in a world where the potential customer base simply isn’t getting any bigger.

The effort to launch and run a competitive CVM program requires a systematic approach that begins with building the proper analytical capabilities, and putting together a team with the necessary talent and expertise to ensure it works. Adjustments to both business processes and IT systems will also be necessary as the operator shifts over to the new approach. Managing CVM successfully will require that the company budgeting and reporting are focused more on what drives value rather than on market-share numbers such as gross adds or average revenue per customer.

The operators must also concentrate their measurement and reporting efforts on value drivers such as the value of each retained customer and the value lost when a customer churns away. In addition, the entire company must be converted to the new way of doing business, through training, a change management program, and appropriate incentives

Key elements of a Customer Value Management program include:

  •   Data Analytics Capabilities
  •   Systems
  •   Incentive and performance management
  •   Training
  •   People & know-how
  •   Behavioral change

A complete CVM system has many advantages; it can provide an in-depth understanding of the behavior and needs of customers based on a carefully tailored analysis of each individual. This, in turn, enables B2C operators to use clearly defined, executable value improvement levers that can deliver short-term, measurable results, and ultimately offer a way to consistently improve value and profitability under changing market circumstances.

Given the increasing saturation of markets in the developed markets, the rising pressure to retain existing customers; and the need to improve contributions to the bottom line, every operator should view CVM as more than a mere addition to their analytical skills because it can be a true competitive capability in the race to increase profits in the years ahead.