Chapter 5 focuses on Customer Portfolio Management (CPM).
Explain the basic disciplines of CPM which include market segmentation, sales forecasting, activity-based costing (ABC), customer lifetime value estimation and data mining.
Next, select one of the disciplines and explain how you would use the concept to improve customer relations at your company.
Basic Disciplines for CPM In this section, you will read about a number of basic disciplines that can be useful during CPM. These include market segmentation, sales forecasting, activity-based costing (ABC), customer lifetime value estimation and data mining. Market segmentation CPM can make use of a discipline that is routinely employed by marketing management - market segmentation. Market segmentation can be defined as follows: Market segmentation is the process of dividing up a market into more-or-less homogenous subsets for which it is possible to create different value propositions. At the end of the process the company can decide which segment(s) it wants to serve. If it chooses, each segment can be served with a different value proposition, and managed in different ways. Market segmentation processes can be used during CPM for two main purposes. They can be used to segment potential markets to identify which customers to acquire, and to cluster current customers with a view to offering differentiated value propositions supported by different relationship management strategies. In this discussion, we will focus on the application of market segmentation processes to identify which customers to acquire. What distinguishes market segmentation for this CRM process should be the identification of the value potential of each identified segment. Companies will want to identify and target those customers that can generate profit in the future: these will be those customers that the company is better placed to serve and satisfy than competitors. purpose is its very clear focus on customer value. The outcome of the Market segmentation is increasingly being transformed by information technology, particularly in consumer markets. The dramatic increase in customer-related data is increasingly used by companies to segment customers according to their attributes and behaviour. Regrettably, segmentation remains highly intuitive or habitual in many companies, particularly so in B2B where the expertise and data richness are less. In a CRM context, however, market segmentation is highly data-dependent. Internal data from marketing, sales and finance records are often enhanced with additional data from external sources such as marketing research companies, partner organizations in the company's network and data specialists. Increasingly companies are using 'big data' to enhance their segmentation practices. Regardless, either through data and/or intuition, the customer management team will develop profiles of customer groups based upon insight and experience. This is then used to guide the development of marketing strategies across the segments. The market segmentation process can be broken down into a number of steps: 1. Identify the business you are in. 2. Identify relevant segmentation variables. 3. Analyze the market using these variables. 4. Assess the value of the market segments. 5. Select target market(s) to serve Basic Disciplines for CPM In this section, you will read about a number of basic disciplines that can be useful during CPM. These include market segmentation, sales forecasting, activity-based costing (ABC), customer lifetime value estimation and data mining. Market segmentation CPM can make use of a discipline that is routinely employed by marketing management - market segmentation. Market segmentation can be defined as follows: Market segmentation is the process of dividing up a market into more-or-less homogenous subsets for which it is possible to create different value propositions. At the end of the process the company can decide which segment(s) it wants to serve. If it chooses, each segment can be served with a different value proposition, and managed in different ways. Market segmentation processes can be used during CPM for two main purposes. They can be used to segment potential markets to identify which customers to acquire, and to cluster current customers with a view to offering differentiated value propositions supported by different relationship management strategies. In this discussion, we will focus on the application of market segmentation processes to identify which customers to acquire. What distinguishes market segmentation for this CRM process should be the identification of the value potential of each identified segment. Companies will want to identify and target those customers that can generate profit in the future: these will be those customers that the company is better placed to serve and satisfy than competitors. purpose is its very clear focus on customer value. The outcome of the Market segmentation is increasingly being transformed by information technology, particularly in consumer markets. The dramatic increase in customer-related data is increasingly used by companies to segment customers according to their attributes and behaviour. Regrettably, segmentation remains highly intuitive or habitual in many companies, particularly so in B2B where the expertise and data richness are less. In a CRM context, however, market segmentation is highly data-dependent. Internal data from marketing, sales and finance records are often enhanced with additional data from external sources such as marketing research companies, partner organizations in the company's network and data specialists. Increasingly companies are using 'big data' to enhance their segmentation practices. Regardless, either through data and/or intuition, the customer management team will develop profiles of customer groups based upon insight and experience. This is then used to guide the development of marketing strategies across the segments. The market segmentation process can be broken down into a number of steps: 1. Identify the business you are in. 2. Identify relevant segmentation variables. 3. Analyze the market using these variables. 4. Assess the value of the market segments. 5. Select target market(s) to serve
