Business Analytics for Sales and Marketing Managers: How to Compete in the Information Age

CUSTOMER VALUE ESTIMATION FOR VALUE-BASED SEGMENTATION

Customer value estimation for negation basically means that the knowledge we have about the value of our customers is being used more or less only within the sales department. Very often and for very good reasons, this knowledge is also used for organization-wide purposes, such as prioritizing customers when they are queuing or given different offerings, for strategy planning, when sales ownership has to be defined, when different service levels must be set, and so on. Therefore, there are several differences between customer value estimation and value-based segmentation:

• Value-based segmentation includes all costs that can be allocated to a customer, not just the ones that the sales department can control.
• Value-based segmentation is based not on value alone; often it is combined with input regarding the strategic importance of the customer, credit risks, and other business rules.
• Value-based segmentation is centrally governed by a customer relationship management (CRM), sales, or marketing department in order for it to be owned by a department that is close to the customers and is interested in optimizing the total customer lifetime value across the whole customer base.

Another argument for a central ownership of the value-based segmentation is based on the fact that customers, regardless of their interaction point and when they interact, should get consistent treatment. The alternative of allowing the different functions to ...