INMA_A01.QXD

Differentiating customers by value

A core approach to relationship marketing is to focus our limited resources and market-

ing activities on the most valuable customers. Figure 6.2 gives a visual indication of this

approach using the terminology suggested by Peppers and Rogers (2002). They identify

three groups of customers with corresponding strategies as follows:

1 Most-valuable customers (MVCs)

These are the customers who contribute the most profit and are typically a small propor-

tion of the total customer base as suggested by their position in the pyramid. These

customers will likely have purchased more or higher-value products. The strategy for

these customers focuses on retention rather than extension. In the case of a bank, per-

sonal relationship managers would be appointed for customers in this category to

provide them with guidance and advice and to make sure they remain loyal. Often this

strategy will work best using direct personal contact as the primary communication

channel, but using online marketing for support where the customer has a propensity to

use online channels.

2 Most-growable customers (MGCs)

Customers who show potential to become more valuable customers. They are profitable

when assessed in terms of lifetime value, but the number of product holdings or lifetime

value is relatively low compared with the MVCs.

Strategies for these customers centre on extension, through making recommenda-

tions about relevant products based on previous purchases. Encouraging similar

re-purchases could also be part of this. Online marketing offers great opportunities to

make personalised recommendations through the web site and e-mail.

3 Below-zero customers (BZCs)

BZCs are simply unprofitable customers. The strategy for these customers may vary –

they can be encouraged to develop towards MGCs, but more typically expenditure will

be minimised if it is felt that it will be difficult to change their loyalty behaviour or the

source of their being unprofitable. Again, digital media can be used as a lower-cost form

of marketing expenditure to encourage these customers to make repeat purchases or to

allow them to self-serve online.

CHAPTER 6· RELATIONSHIP MARKETING USING THE INTERNET

Figure 6.2Categorising customers according to value

MVC

Most-valuable

customers

MGC

Most-growable

customers

Lifetime value of cu

stomer

s increa

se

s,

number decrea

se

s

BZC

Below-zero

customers