Using customer profitability and customer lifetime value to manage strategic accounts

by Régis Lemmens and Tomas Vanderbiesen

Abstract

Today's economy is characterized by an increasingly globalized business-to-business environment, whereby a very large proportion of a supplier's overall revenue stream is generated by a very small number of customers. Because of the strategic importance of these customers, they should be considered assets of the company and treated accordingly. The performance of these customers should no longer be based on their revenues but on their profitability and lifetime value. This paper explains the concepts of customer profitability and customer lifetime value at an individual key account level. It also proposes a framework that guides strategic account managers during the account planning process, to improve the relationship with their strategic customers in a profitable way.

Introduction

Sales, and more particularly strategic account management, is undergoing a paradigmatic shift that involves a change in focus from managing customer accounts based on revenues to managing the accounts based on profitability for planning and follow-up; and to managing based on valuation for long-term strategic resources and investment-allocation purposes. This is triggered by an ever rising globalized business-to-business (B2B) environment, whereby a very large proportion of a supplier's overall revenue stream is generated by a very small number of customers. These customers, ...

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