Microsoft® Excel® 2010: Data Analysis and Business Modeling

Chapter 75. Determining Customer Value

Questions answered in this chapter:

• A credit-card company currently has an 80-percent retention rate. How will the company’s profitability improve if the retention rate increases to 90 percent or higher?

• A long-distance phone company gives the competition’s customers an incentive to switch. How large an incentive should it give?

Many companies undervalue their customers. When valuing a customer, a company should look at the net present value (NPV) of the long-term profits that the company earns from the customer. (For detailed information about net present value, see Chapter 8.) Failure to look at the long-term value of a customer often causes a company to make poor decisions. For example, a company might cut ...