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Customer Relationship Management: How to determine an initial customer value? CRM in the crisis



Voraussichtliche Lesedauer: 6 minutes

Customer Relationship Management Customer Value CRM Crisis

In times of crisis or when budgets are tight, the sales and marketing shotgun is no longer appropriate. What counts is to implement targeted measures. Away from the watering can and towards marketing activities that are focused on target groups.

Customer value analysis helps achieve this reduction in wastage. And it does so very clearly.

How to determine an initial customer value using customer value analysis?

It is not difficult to determine a customer value. To do this, you need an RFMR and a contribution margin calculation. Both do not require methods that require months of preparation.

This means that anyone can, in a short time, calculate a customer value analysis for their customers in basic terms. Therefore, it is important to address this topic as an easy-to-implement success factor.

20% – 30% of customers account for 70% – 80% of sales!

This phenomenon from a pure sales perspective is widely known. But what does the distribution for the contribution margin look like?

If the contribution margin is considered, it looks like that 20% of the customers generate approx. 100% of the contribution margin. Another 30% then generate another 50% of the contribution margin. The remaining 50% of the customers, however, contribute a negative contribution margin. Especially the worst 10% (from a contribution margin point of view) cause a “real loss”. These are the “unprofitable” customers of our company who, with the process costs associated with them, generate more expense than positive contribution margin.

Illustration of the influence on the contribution margin of individual customer groups

However, it is important to mention at this point that in this “bad 10%” there are definitely customers who make an important contribution to sales!

Therefore, the first task is to identify this dilemma in the company. The customer value analysis helps here as a scoring that can be determined for all customers.

The second task is to decide: Does the company want to continue to have these customers or say goodbye to them? We have already written a highly regarded article on this subject.

Better resource management with RFMR analysis

By looking at the contribution margin, it is known which customers actively contribute to the company’s success and which ones slow it down with a negative contribution margin.

However, in order to be able to successfully decide in the long term how to deal with customers and their different contribution margins, a second tool is necessary when considering customer value. The RFMR analysis. RFMR stands for

  • Recency (date of last purchase)
  • Frequency (frequency of purchase)
  • Monetary Ratio (average order/purchase value).

After all, one thing that is important in CRM is to differentiate valuation and communication based on customer behavior.

The most important questions in RFMR analysis are:

  • Are we talking about active or passive customers? How long is the active period defined and how long can the interval between two orders be?
  • When was the date of the first or last purchase within the active period?
  • How often were purchases made during the active period?
  • What is the average purchase and order value?

The result from these questions is a two-dimensional table that compares the average order value and the average distance between two orders.

Exemplary representation of the customer groups in an RFMR analysis

The two dimensions of the resource control table are quickly explained.

The y-axis shows the average distance between two purchases. On the top left are the customers who have a small distance between two orders and on the bottom left are the customers with an average long distance between two orders.

On the x-axis in the lower left corner are the customers with low order values and the customers with high order values in the upper right corner.

The result of this part of the customer value analysis is: That group IV are the best customers. These have a relatively high order volume per order and a relatively small interval between two orders.

Summary of the two methods RFMR and customer contribution margin

Both analyses show: Not all inquiries or customers are to be treated equally, but rather according to their customer value or contribution margin.

In practice, you can start with the RFMR analysis and add the contribution margin later.

Of course, it is best to combine both. Because this way you have included the buying behavior (RFMR) on the one hand and the value (customer contribution margin) on the other.

And both together are a strong indicator of what customer management has to do next for this customer group.

Further information on customer value analysis

This video helps to get a first understanding of customer value.

For us, the topic of customer value is a focal point both in consulting and here on the portal.

We are happy to offer a free 30-minute consultation on the topic of customer value. Book an appointment directly here.

Note: This is a machine translation. It is neither 100% complete or 100% correct. We can therefore not guarantee the result.


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