| |
|
|
 |
| Identifying Customer Potential |
|
It is well established that typically a small percentage of customers is responsible for a disproportionate percentage of a company’s revenue and profit. Commonly referred to as the 20/80 Rule or Pareto’s Law, this concept has helped formulate how businesses have marketed to their customers, investing in some and cutting spending in others.
Customer potential, however, is determined by how much revenue (or profit) a customer can generate in the category, and so it involves looking at measures like Share of Wallet (SOW) and Expected Lifetime Value. In the short run, SOW is pertinent because it quantifies how much opportunity currently exists with each customer.
In the longer run, companies need to examine how a customer’s value is likely to change over time. Customers that are high value now may not be high value in a few years, and vice versa. That’s because customers frequently go through a fairly predictable lifecycle where value builds, peaks, and declines.
Survey research and third party data overlays are particularly useful in estimating short-term potential customer value, while statistical modeling is a proven approach for estimating long-term potential. |
|  | | For more information, call us at 781-494-9989 or email us. | |
|
|
|
