Existing customers account for much of business growth and profitability. Recent research emphasizes that understanding, and predicting, the behaviours of existing customers is crucial to success in today’s highly-competitive markets. Costwise, acquiring new customers is more expensive than having current ones to repurchase. In addition, while some customers can be a source of profit, other customers can be a financial liability. CRM’s statistical methods help identify profitable customers, understand their behaviours, effectively communicate with them, and fulfill their needs and wants.
Recency, frequency and monetary value (RFM) of past purchases are three parameters of customer loyalty initially used to improve the response to marketing messages. Identify and build relationships with customers who purchase most recently, most frequently, and spent the most with your business.
Customer lifetime value (CLV) analysis evaluates the customer’s worth to the business through estimating the present monetary value that the customer is likely to generate over their stay with the company. Find, and manage relationships with, customers who are profitable in both the short and long run.