Customer Relationship Value vs Customer Lifetime Value

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An interesting article in this month’s Harvard Business Review describes the difference between Customer Referral Value (CRV) and Customer Lifetime Value.

CLV is more well known — it is the lifetime value of a customer to a particular company. The value is computed by taking a sum of their purchases from the company over time.
CRV is more tricky — it is defined as the value of the customer’s referrals over time. In other words, it is the degree to which other people do business with the company as a result of being referred by that individual.
What is interesting is that the two are not necessarily related.
Miss Mattie, who rarely frequents the store and hardly buys anything when she does, could turn out to have very high CRV if she happens to be the helper of the richest family in the district, and her sister also happens to be the helper of someone else in the same family.
In an earlier post, I made the point that traditional CRM is too shallow an instrument to measure the value of a customer in Caribbean economies. I argued that the person’s network was just as important, and to ignore the Miss Mattie’s of the district is to do oneself grievous harm.
This new measure is, I think, an important one in understanding retail behaviour in the region, marked as it is by vast disparities in income and education. The societies are small, and CRV is critical to understanding the importance of customers by beginning to understand the quality of their networks, and the likelihood of them giving a positive referral.
When the CRV is known, companies can make intelligent decisions about how to market and advertise to each customer. Such an analysis is sure to produce some surprises.

Caribbean CRM and Facebook

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Here is the genesis of new possibility…

In an earlier post, I mentioned the idea that doing CRM properly here in the region would benefit from a way of finding out who are the people in a prospect’s network.

Funnily enough, I am discovering that Facebook is precisely and exactly the right solution to the problem of finding out who is in one’s network. Here in the Caribbean, this equates to opportunity, as everything important is done through “who you know” and for the first time, you can find a LOT of people that are known and trusted by each other without asking them directly.

I am amazed that no-one seems to have taken advantage of this in any way that I can see.

Amazed.

But I am sure it’s just a matter of time before someone sees Facebook as more than just a cute application, and an addictive pastime, and starts using it to get into the world of influential people.

Actually, maybe the folks over at Boom Networking may have gotten the right idea. They have opened up a page on Facebook to advertise their next event this weekend. If I weren’t on Facebook, I wouldn’t have heard about it, and I have been trying to attend one of their events for the longest time. (Once again, I’ll be missing out, too.)

Stay tuned for more on this topic.

On Implementing Caribbean CRM

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I recently attended a conference in Kingston on the topic of CRM and its implementation.

While I am no expert on the topic itself, I was asked to contribute a few words to the pre-conference newsletter. The conference was put on by a friend of mine, and included a presenter who happens to be my second cousin.

Attending the conference had me reflect on the efforts I am engaged in to use CRM for my own business, and also on some of the ways in which CRM is not practiced here in the Caribbean.

I suspect that Jamaica is representative of the region in many ways.

When I lived in the US, I, like many professionals, lived in an environment in which un-requested advertising — junk mail and spam — were a fact of life. Giving away contact information was always a question of how much unwanted advertising one would receive in return.

Here in Jamaica, however, just about no-one is interested in who I am, or in using targeted mail or even email.

Not that I miss being blasted with useless paper each day that only ended up in the garbage.

However, the fact that I have not even gotten advertising addressed to “Occupant” tells me something about the way in which local companies are not using even basic, bread and butter techniques. The fact that I live in a fairly affluent uptown community only adds to the mystery.

When I shop, bank or otherwise do daily business, only one or two companies have ever asked me for my email address or phone number. None of the one or two companies has effectively followed up with me after gathering the info. I can only recall a single company that did call me, and I seem to have fallen off their radar.

When the gym membership for my wife and I expired recently, we seem to have been the only ones that noticed. We received no calls, no mail, not a single email, and, it seems, no interest in continuing our infrequently used membership.

This all makes me think that the primary challenge in implementing CRM in Jamaica has nothing to do with the software or IT. Instead, it has everything to do with causing a shift away from mass-advertising to one-to-one advertising.

I recall up until a few months ago before moving, that trucks would pass by on Constant Spring Road mounted with speakers turned up to full volume – the better to be heard above the din of traffic and music.

It is classic interruption advertising conducted Jamaican style, turned up to “full hundred” levels.

Yet, the irony is that no-one really buys anything important in Jamaica without consulting the people in their network. In this small country, who you know and what they know is critical to getting things done, and the practice of asking for advice is the hallmark of the efficient professional.

Also, just about everyone in Jamaica carries a cell-phone that receives text-messages.

It seems to me that we are long overdue for a change to a form of that the uses brains as opposed to brawn, finesse as opposed to force. Since trust is the key currency of the land, and who you know is all important, companies that figure out how to gather the kind of information they need to build trust and learn who the customer trusts personally, will do very well.

They will however, have to demonstrate a key characteristic that our companies seem to lack in their marketing efforts – courage.

The first company that commits to building one-to-one relationships will probably make some very big mistakes in the beginning, and will probably face being shut down by the powers that be. However, if they persevere and are determined how to learn to do it right, I think that they would make themselves indispensable to thousands, including myself.