5. Customer Profitability

Introduction

Key concepts covered in this chapter:

Customers, Recency, and Retention

Customer Profit

Customer Lifetime Value

Prospect Value Versus Customer Value

Acquisition Versus Retention Spending

Chapter 2, “Share of Hearts, Minds, and Markets,” presented metrics designed to measure how well the firm is doing with its customers as a whole. Previously discussed metrics were summaries of firm performance with respect to customers for entire markets or market segments. In this chapter, we cover metrics that measure the performance of individual customer relationships. We start with metrics designed to simply count how many customers the firm serves. As this chapter will illustrate, it is far easier to count the number ...

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