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Home EMarketingECRMCustomer flow

Customer flow

How many times have you heard it?

"Cash is King"

"You must have a cash flow statement"

And the definitions:

"A measure of a company's financial health"

"The actual movement of cash: measuring cash inflow minus cash outflow and the sources and application of funds"

"An analysis over a period of time revealing the availability, or lack, of cash"

And it is all true. But what provides the cash?

That's right, paying customers with a high customer lifetime value.

Customer flow leads to cash flow.

So when was the last time you heard anyone talk about a customer flow statement? But customers are a company's largest asset!

We define customer flow as:

• the measure of a company's long-term prospects;

• the actual movement of customers: measuring customers gained versus customers lost;

• the "lifetime" of those customers with the organisation and their lifetime value.

Also what about the process of obtaining and retaining satisfied customers and how effective that process is?

Our guess would be that you have heard 'customer flow' but rarely. Yet it is customer flow that creates cash flow and still many (if not most) organisations have no idea of:

• the sources of their customers

• the importance of one source relative to another

• how much it costs to obtain customers from each source

• how long customers from each source stay with the organisation

• how frequently they buy

• how much they spend

• what they buy

• when they buy

• why they buy

• where they buy

• how they buy

• why they leave or stop buying

There are 12 measures of customer flow in the list above and that's not completely detailed or exhaustive. To how many does your organisation know the answer?

Customer flow - obtaining and retaining satisfied customers also brings out customer lifetime value and this can be used in a variety of ways:

• Defining objectives
  e.g CLV has to be increased by 10% over the next three years. This objective is a more exact measure of the company' economic development than the traditional objectives like the annual turnover.
• Alternative marketing strategies
  You can calculate the profitability of an unchanged acquisition or retention strategy with an alternative based on customer retention and development and the consequences of different target groups, budget allocations, pricing policies, customer retention rates, sales channels and segments.
• Customer service and complaints
  Services like hotlines, upgrading and invitation to events could be defined and targeted to customers who have the highest CLV (and not the highest actual turn over). For complaints deciding what action to take immediately and how much to invest in solving the problem can be decided.
• Loyalty programmes
  The future profit from an investment in a new loyalty programme including the results of different forms of customer rewards (discounts, exclusive offers, special service, upgrading etc.) could be learned by calculating CLV, both with and without a loyalty programme.
• Managing the sales force
  CLV could be used to help decide which sales districts to focus on (what is the potential CLV in a given district?), how to allocate sales resources, how to reward sales agents etc.
• Reactivating inactive customers
  Instead of trying to reactivate all inactive customers the efforts should be directed toward those customers whose CLV is potentially above average.

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