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Customer Relationship Value vs Customer Lifetime Value

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.
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Almost the Last Day to Vote for My Proposal

In a prior post on Sep 20th, I mentioned that I had entered my proposal to write a new, hopefully revolutionary, manifesto on the skill of time management.

What I have neglected to mention is that since my last update on Sep 23rd, the proposal has garnered 435 votes. So far, it’s the most popular proposal of the 11 being offered up this month.

I have no idea what the threshold is to be asked to take the next step and “write a manifesto” but… if you haven’t voted, please do so.

The final date is Friday Oct 19th.

The title is “On Time Management: Toss Away the Tips, Focus on the Fundamentals”

Click here to be taken to the proposal.

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Culture Change Gone Bad

While a culture change is very hard to do well, it is very easy to do badly.

In this article from CNN, entitled “No storybook ending after tycoon dolls up vilage,” a millionaire adopted a US town, and attempted to give it a makeover.

As could be predicted, she ran into resistance, as the towns-people gradually developed a hostile resistance to her ideas and interventions.

I think she misunderstood her challenge — it was not to change the physical environment, but instead to cause a shift in the culture of the people in the town.

This is a mistake that CEOs often make – believing that money can buy just about anything.
Sometimes it can buy hearts and minds, but when it does the kind of people who end up being bought are usually not the strongest characters, and they are not likely to stay bought for long.

This approach just does not work, as this tale amply demonstrates.

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Heedless Self-Interest

In an article from the New York Times, I found the following quote:

“We have always known that heedless self-interest was bad morals,” said F.D.R. “We know now that it is bad economics.” These words apply perfectly to climate change. It’s in the interest of most people (and especially their descendants) that somebody do something to reduce emissions of carbon dioxide and other greenhouse gases, but each individual would like that somebody to be somebody else. Leave it up to the free market, and in a few generations Florida will be underwater.


In a prior post, I wrote about the importance of appealing to people’s self-interest as a way to change the culture of a company. With more information, I argued, people naturally do what’s best for them and others, once they can see the apparent interconnection of all that is.

The Course in Miracles says that the fact that we are all connected means that attack is impossible, as it rests on the idea that we are somehow separate.


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Updating The One Page Digest

The One Page Digest is almost a year old, in terms of issues.

It has been a useful addition to the Framework Info products, and a good way to share useful links quickly and efficiently with the over 288 subscribers it currently enjoys.

I am wondering whether or not it should be changed or upgraded in any way. If anyone has any useful ideas, please either share them here or send your feedback to me personally.

Most of the back issues can be viewed at http://urlcut.com/digesthome

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Cost of Problem Analysis, Solution Benefit and Solution Cost

I have recently learned a new approach to thinking about the cost of a client’s problem.

It’s called Cost of Problem Analysis (CoPA), and in this technique a salesperson guides a client through an honest assessment of the cost of not having the solution in place.

For example, a CoPA based on the installation of a new soda machine, might take into account such costs as:

  • the added maintenance of the old machine
  • the cost of having the janitor open the machine to retrieve lost change
  • the lost sales from not being able to sell crackers and cookies as well as sodas
  • the additional cost of electricity
  • any other costs that might be traced to the old soda machine that would not be incurred by the new

This is broken down to a single dollar figure.

On the other hand, the solution benefit outlines what gains will be made from having the solution put in place. In the case of the new soda machine,

  • it may carry more drinks, while also carrying a larger selection of drinks
  • it may help to sell more drinks by suffering less stock-outs.
  • crackers and cookies may offer a higher price margin,
  • it would create opportunities for people to make more than one purchase at a time

The Solution Cost is merely the selling price of the new machine.

From these numbers, it is easy to determine whether or not the investment is worthwhile.

It may not be, and the good salesperson can help the customer to diagnose the numbers with some honest assistance.

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Take It Or Leave It Selling

By and large the retail shopping experience that I have experienced across the region can be characterized as “take it or leave it”.

Companies seem to be staffed up to the hilt with people who just could not care less whether or not the customer makes a purchase. In fact, their lives are easier when the customer walks out and doesn’t bother them.

This attitude, which pervades non-tourist Caribbean countries, costs company owners a LOT of money each year, as they wonder why it is that their sales are falling and their traffic is dwindling.

I believe that the way to impact this attitude on a large scale is to:

  1. use psychometric testing to weed out the wrong people
  2. train them extensively
  3. role model the level of service desired
  4. continue to reinforce, coach and train
  5. consolidate jobs, and pay the better staff more

Part of the training I would provide is what I call “face and body management”. I would use video-taped feedback to help employees see what they look like when they are serving customers. They might need to learn how to project an air of commitment and attentiveness — something that contrasts with the air of boredom and “I don’t care” that they might have learned in school.

I get the distinct impression that our front-line service personnel just do not know what they look like when they are attempting to provide service to others, and many would be appalled if they were to receive objective feedback in the form of a taped interaction.

Many of them seem to bring juvenile, teenage behaviours to the workplace, and in the absence of role models, it becomes the norm. Perhaps was fashionable when they re 15, but in the workplace it is ineffective and leads to customers feeling that the employees don’t care before the first words are exchanged.

I compare it to body odour.

Someone has to tell a teen to wear deodorant for the first time, because the chances are good that they are unable to smell themselves. In like manner, unless they are helped to see what they are doing physically, they are unable to change what their bodies and faces are doing.

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CaribHRNews changes

I have done some work on CaribHRNews that I think may make it more user-friendly:

  • it is more readable, as I have moved some of the non-essential information to the bottom of the page
  • I am changing the frequency of release from once per week, to once every two weeks. I think this helps to keep the information fresh, as there were too few changes from week to week, although this may change in the future
  • I have added a new link to a blog called “Evil HR Lady” that is quite funny!

The latest issue can be viewed at: http://www.squidoo.com/caribhrnews/

Also, CaribHRNews is sent out to all members of CaribHRForum.