Are your customers worth more than money?

Abstract

This paper suggests that relationship marketing, with its focus on customer retention and managing the customer relationship over its lifetime, entails understanding the twin aims of what value means for the customer and also the value of the customer to the retailer. The emphasis in this paper is the latter as it is often assumed to be non-problematic. Different methods of assessing the value of customers in terms of profitability are evaluated and their shortcomings discussed. The paper goes on to propose that economic value, reflecting risk, is a better measure of the value of the customer. However, even economic value has a shortcoming: calculations of the total value of the customer should include relationship benefits as well as economic value. Strategies to maximise relationship benefits are discussed.