Chapter 85
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 cell phone company wants to give 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 NPV, see Chapter 8, “The net present value functions: NPV and XNPV.”) Failure to look at the long-term value of a customer often causes a company to make poor decisions. ...
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