What is Customer Value Maximisation and why does it matter to my mobile business?

Friday, 11 January 2019

Customer Value Maximisation emerged some years ago as an approach to help the banking industry recover from the financial crisis of 2008/9 and as an evolution to the practice of customer lifecycle or customer relationship management. The aim of CVM is to derive as much value from the existing customer base as possible, because it’s believed that this can deliver the greatest results in the shortest possible time. Since then, CVM has been enthusiastically adopted in many sectors – but not, so far, to any great extent in the mobile industry.

That’s surprising because, for MVNOs and MNO second brands in particular, competition is extreme – both directly in relation to other MNOs and MVNOs, and indirectly with alternative ‘over the top’ services. In this context, the ability of a mobile service provider to maximise the value available from its existing customer base has become a crucial factor for its survival as a successful business and to support efforts to create sustained competitive advantage.

Briefly, the main pillars of Customer Value Maximisation are:

  • Comprehensive data to develop a complete picture of customer value
  • Sophisticated analytics to pinpoint particular value enhancement opportunities
  • The means to deliver tailored offers and promotions to specific customer segments

However, this needs to be incorporated into an approach that is driven by a focus on maximising customer value. For example, McKinsey & Company[1] defined both a process and the criteria for an effective CVM strategy that can be summarised as follows:

  • Stage 1: Develop customer profiles
  • Stage 2: Create a value opportunity heatmap
  • Stage 3: Execute effectively

In our CVM White Paper, we explore these stages in more detail, so if you want to know more, you can download the paper, here.

Meanwhile, let’s consider how this relates to mobile service providers. In essence, CVM comes down to understanding your customers – their habits and behaviour, the services they do or don’t consume, and their individual and demographic profiles. If you know what your customers like, you can suggest similar things to them. If you know that people with a particular profile like something, then you can try to interest it to someone with the same profile but who hasn’t already got it. And so on, and so on – the more you know, the more you can correlate information to create new value capture opportunities.

It’s not just about up- and cross-selling, though. By understanding current and past behaviour, you can also attempt to model and predict future trends, such as the propensity to churn. Similarly, by connecting real-time triggers (such as location and activities), a richer model of value points and opportunities can be created.

All of which sounds obvious (and very familiar to users of online shopping platforms) but it hasn’t been obvious to the mobile industry. Indeed, mobile operators and MVNOs lag far behind their peers from other sectors, such as retail, banking and insurance. It’s time that changed – but how can this be achieved in practice? Read part two to find out more.

 

[1] Driving intelligent growth with Customer Value Maximisation – How banks should go beyond CRM. McKinsey & Company, Inc (2010).

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