Microsoft Excel 2019 Data Analysis and Business Modeling, 6th Edition

Chapter 83 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 of 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, “Evaluating investments by using net present value criteria.”) Failure to look at the long-term value of a customer often causes ...