Realize Your

Customers Full Profit

Potential
by Alan W.H. Grant and Leonard A. Schlesinger

Group 2
Arun Britto 2015196
Dhawal Sharma 2015144
Navneet Rathi
2015216
Rituparna Bhowmik 2015169

Profits for a company can be increased in only three ways:

Acquire new customers

Increase the number of people who use a product or
service.
Enhance the profitability of existing
customers
Motivate people to engage in behaviors that generate
higher returns.
Extend the duration of customer
relationships
Maintain those enhanced behaviors for a longer time.

Emergence of Management Models

Companies began to adopt a productivity model
Technological innovation in manufacturing, along with the creation of regional and national distribution channels, enabled
organizations to mass-produce products for customers beyond their local markets.
Mid 1800s As a result, a companys profitability began to depend on the scale of its operations
Under this model, managers focused on costs and capacity

capacity began to outstrip demand

It became necessary to compete for customer cash flows by adopting a competitive business model
1960-70s companies discovered a strong correlation between market-share leadership and profitability

the quality model was born

Using new continuous-process- improvement techniques, they identified and reduced the costs of rework, inefficiency,
and waste
Mid 1980s organizations successfully applying the quality model showed how superior financial performance could be achieved
despite inferior market-share positions.

Current
Trends

use databases to understand the specific needs of those subsegments, and take advantage of flexible manufacturing
and delivery to provide cost-effective offerings tailored to each subsegmentofferings such as product features, price
discounts, service arrangements, and purchase warranties.
The relationship between the financial investment a company makes in particular customer relationships and the return
that customers generate is called Value Exchange
They define their target customer base, quantify the current and the full-potential value of these relationships, and
commit the entire company to closing the gap between the two.

The Full-Potential Gap

Certain questions need to be answered to

identify this gap:
What percentage of your target customers do you currently
have? How many could you have?
How do your customers currently behave? What if they
exhibited the ideal behaviour profile (for instance, bought
all lines, used them exclusively, and paid full price)?
How long on average do your customers remain with the
company? What if they remained customers for life?

Value-Exchange Optimization Examples

First USA
countrys fastest-growing issuers of Visa and MasterCard
It has now amassed more than $12 billion in total receivables, ranking fifth
in the industry
First USA currently extends more than 750 different credit card offers. Each
presents a different combination of variables: the annual interest rate, the
annual fee, the credit limit, and add-on features such as collision insurance
Union Pacific
applied the principles of value exchange to the railroad business by
creating cross-functional teams
they understand which changes in customer behavior will improve returns
No element of an offeringthe number of rail cars, train schedules, rates,
or transit timesis sacred
The teams use any of these variables as needed to maximize the long-term
value of relationships with customers