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Jan 1, 2011 12:00 AM
I hate to deal in “absolutes,” but I believe there is one overwhelming truth in industries such as print that largely involve customized products and services: Nothing counts — not equipment, technology, demeanor, experience of staff, physical facility, size of staff, anything — unless it can be converted into perceived value to customers. Business is all about formation and retention of customers.
Companies dealing with the “double whammy” of a recession and print under siege from alternative media understand the difficulty of replacing lost customers. In the heat of battle, there's a tendency to act as though the value of an existing or prospective customer is confined to its projected sales and profits. Sales and profits are not to be demeaned as yardsticks of a client's value. However, other criteria should be considered.
The business literature suggests that Lifetime Value (LTV) is the basis on which customers should be evaluated. (Some economists and academics driven to believe they must contribute something unique to the marketing literature now refer to CLV — Customer Lifetime Value.) I agree with the need to use LTV as the most important metric in determining the value of a customer.
Listed below are some of the elements of the LTV calculation that should be considered in addition to sales and profit.
Coupled with account-specific sales and profit, these components of LTV will provide a general idea regarding the value of a customer. My experience is that even an imprecise attempt to calculate the LTV of each customer results in an elevated appreciation of many second-tier accounts that are characterized by a long-term relationship, minimal spoilage, and the proverbial wheel that doesn't squeak. It's easy to overlook these accounts.
Dick Gorelick's marketing expertise graced the pages of print industry trade magazines for 25 years. See our tribute as well as Dick's past columns at www.americanprinter.com/gorelicksmanagement.
Dick Gorelick passed away on September 12, 2010. Dick was a prolific writer who always worked far ahead of his deadline. While Gorelick & Associates has formally suspended its operations, Dick's writing remains timeless.