Customer lifetime value should be part of the culture, but remember the basics

Telefonica has calculated that if you bundle and target offers effectively, you can increase your revenues by 25 times – not 25 percent, 25 times. Suntec’s Tony Sceales presented this information as part of his session at the TM Forum Live! event.

It is refreshing to see customer lifecycle values presented at what used to tech type events, and it is further evidence of a real shift towards putting the customer at the centre of everything we do.

Mr Sceales says that, according to Telefonica, if you offer one product to a customer, your average revenue will be £731, and you will keep the customer for an average of three years. Your churn rate will be 35 percent.

For each service or product you add, your churn rate drops and your revenue per customer increases. This is not rocket science, but get the customer to buy four products and the lifetime revenue goes up to £19,440, the chance of him churning goes down to 5 percent and you will keep him for 20 years.

In the ‘customer experience’ industry it is commonplace to put life time values on customers. And in industries where it is in the blood, such as retail, it is part of the training and part of the culture.

Sears in New York used to instil the idea into all their trainees that each customer who came into the store had $50,000 on top of his or her head. Jeep worked out that the life time value of each customer was something like $225,000. And this information alone, when used as part of the training, helps transform that most difficult of things within a company – culture.

Of course, IT is a central part of any plan to transform the culture. It is one thing to get your customer service reps excited about customers, but if they cannot easily advise, cross sell and up sell, the excitement will be short lived. Centralised product catalogues are becoming increasingly common and with good reason. Information on a range of products and services, at a glance, makes life easy, interactions with customers intuitive and natural and the relationship is stronger as a result.

We also have to accept that while CEOs hire CEOs (Customer Experience Officers) to instil this new culture with cross functional teams, there is a basic foundation on which customer experience – and all the fancy but important talk is based – the product.

Whether a telco or a car manufacturer, the product must do what it says on the box. If it is a car, you have a right to expect certain things happen when you switch it on. With a mobile device attached to a 3G network – one day possibly a 4G network – you have a right to expect that it will do the things that it says it will do. Connectivity is becoming a basic right, and in some countries, developed and advanced ones such as the UK, that right is still not guaranteed.

So, as we consider partnerships with OTT players as the ‘way forward’ we should also consider that good old fashioned connectivity is where it all begins.

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About Alex Leslie 400 Articles
Alex was Founder and CEO of the Global Billing Association (GBA), a trade body focused on the communications sector. He is a sought after speaker and chairman at leading industry conferences, and is widely published in communications magazines around the world. Until it closed, he was Contributing Editor, OSS/BSS for Connected Planet.

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