Make Your Numbers™ ©2013 Zilliant Incorporated, All Rights Reserved Worldwide

Measure and Deliver Maximum Profitability

With over 20 years of experience, Penny has

worked closely with sales organizations to align

revenue and product objectives with market

needs. She has defined, developed and executed

global marketing and product initiatives for

manufacturing and distribution companies

enabling sales teams with tools and programs to

exceed market and corporate expectations.

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Penny J. Merian

Director of Product Marketing

Table of Contents A. New Measure of B2B Sales B. CLP is Not a One-time Assessment C. Why Should I Care D. Growth Strategies E. Transforming Potential into Hard Dollars F. Using Science to Drive CLP G. Customer Relationships Grow or Shrink H. Maximizing CLP I. Value Imperatives and Measures J. From Insight to Foresight K. Power of Science to the Art of Selling

Customer Lifetime Value (CLV) is used to calculate the lifetime value of a new

prospect to determine if the acquisition costs outweigh the overall value that the

prospect will deliver. In other words, it measures the profitability of customer

acquisitions.

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What about after you acquire the customer –

how do you measure the value of the ongoing

relationship as a function of wallet share?

Customer Lifetime Potential (CLP) is a customer’s potential monetary worth relative to the expansion in breadth and depth of the relationship over time. CLP is a powerful business metric that helps drive what a customer will do – not just a forward-looking indicator. It is a guide for account executives to focus where it will pay the largest dividends.

It is a continuous ‘what else?’ indicator of a customer’s potential to maintain and

increase spend – known as “Performance to Potential”. It is a strategy for holistic sales

penetration by answering these questions:

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Businesses that measure, and more importantly, maximize CLP have a distinct

competitive advantage. In today’s increasingly competitive marketplace, customers have

more options available to them than ever before.

• How has a customer’s spend changed over the past quarter?

• How much of the change is within new versus existing

product categories?

• What level of spend should be expected and could be

achieved next quarter?

• What “potential trajectories” will continue to grow a

customer’s spend?

• What customers are beginning to defect or spending less in

specific categories?

• What customers should I target for specific programs?

A recent study by Bain and Company found that it is six to seven times more costly to

acquire a new customer than to retain an existing one.

Given your customers are of such strategic importance, your program to maximize

CLP and more importantly, extend this way of thinking throughout your sales process is

critical to maximize the value of your customer base.

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6 to 7 50% 95% Number of times more costly it is to acquire a

new customer than retain an existing one

Amount customer attrition if left dormant

over a 5-year period

Amount of increased profits that can come

from boosting customer retention by as little as 5

percent

Going beyond your initial efforts to

acquire new customers and focusing on

identifying and retaining profitable

customers to increase their value over

time requires the anticipating customer

needs and presenting attractive offers in

the right way, at the right time.

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What is your strategy for growing

revenue this year? • Acquire new customers, or

• Grow your existing customer base

For most B2B companies, it’s the latter,

which makes customers – not products –

your company’s most valuable asset.

Products and services may be easy for a

competitor to copy, but a company that

excels at creating customer loyalty is less

vulnerable to competitive attacks or

customer defection.

You’re either growing or dying! ”

“ Anonymous

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Customers buy when the perceived value-to-price ratio of your

product or service is greater than other alternatives.

1. Establish Potential (CLP Index

goal). Growing existing customer value, cost

effectively and efficiently, requires a focus on

cultivating your relationship and tailoring

your outreach to their specific needs. For

companies with large product catalogs and

customer bases, this is a complicated

process, requiring a unique approach to:

• Understand buying patterns of your

best customers, beyond traditional

segmentation

• Proactively offer the right products for

cross-sell and upsell opportunities

• Have strategic and profitable

conversations

2. Reverse the churn. Customers

don’t typically make a snap decision to

stop buying a product. They gradually

stop buying over time. By recognizing the

patterns that lead to customer churn

early, you can take proactive and

preventative measures to stop defections

before it’s too late.

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To establish a sales culture focused on “Potential to

Performance” that utilizes CLP to extend long-term

value creation, you need to include steps one and two

discussed on the previous page.

By applying science and technology

to your transaction data, you can

deliver automated, predictive

guidance that focuses sales reps or

distributors on the customer

opportunities with the highest

probability for expansion and

growth, and retain existing

customers.

Companies with a deep understanding

of their customers can focus sales reps on

the highest potential growth opportunities.

Move beyond intuition and opinion to

predictive guidance to understand how to:

• Profitably grow revenue in every

customer tier

• Pinpoint cross-sell opportunities and

effective cross-sell rules

• Align sales territories through buying

pattern-based segmentation and demand

profiling

• Create targeted product programs

focused on the right set of customers

• Move customers along a potential

continuum by aligning demand creation

strategies with focused sales execution

initiatives

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Have your competitors ever raked in

profits from customers you failed to pay

attention to? This is a costly mistake.

Maximizing the lifetime potential of

your customer base is challenging, but

possible. Based on extensive experience

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It’s far more cost effective to grow

sales from existing customers than to

attract new ones.

In a recent IBM Global

Survey of CEOs,

getting closer

to the customer

ranked as the top

priority among

CEOs in

companies

that the survey

identified as

“standout” organizations.

with a wide range of

organizations, Zilliant

has identified Five

Value Imperatives that

comprise a customer’s

CLP Index Score.

Leading organizations

use these best practices

to maximize Customer

Lifetime Potential.

Value Imperatives Measurements

Maximize recurring revenue and look for new business within your customer base through targeted cross-sell and upsell offerings. Targeting programs to customer micro-segments which have a high propensity to buy based on similar spend is much more impactful.

• Customer growth rate • Number of products/

categories purchased • New product category spend

Customers respond to sales reps that truly understand their world. You can’t just outsell competition, you have to “out learn” them. But you need to do this as efficiently as possible, balancing selling time with research.

• Insight score (value of insightful conversations)

Proactively drive increased retention by identifying early indicators of competitive poaching and/or defection.

• Retention rate • Churn rate

Base your customer strategy on predictive purchasing profiles derived from past purchasing behavior, current behavior, product affinities and business segmentation.

• Purchase Pattern Profiling™ • CLP effect curves • Demand shaping

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©2013 Zilliant Incorporated, All Rights Reserved Worldwide

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Having a system support methodology to progress customers along the CLP

continuum, takes you from a product view to a framework of actionable information.

Maximizing CLP through sales force and/or distributor utilization will determine the

ultimate success of your company.

Global manufacturers and

distributors are constantly

looking for ways to make their

operations more agile, efficient and

profitable. Innovative companies are

applying that mindset to maximize

CLP for each customer across their

entire books of business.

Business success requires a new

depth of customer insight to efficiently

maximize CLP in a customer economy.

You are spending today on sales initiatives. If you

could increase your opportunity conversion rate 35-55

percent and increase customer loyalty for as little as

$1.40/day per sales representative, would you?

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It is possible to gain these insights using science to maximize

Customer Lifetime Potential and focus your sales reps on the best growth

opportunities

Contact Us Today

©2013 Zilliant Incorporated, All Rights Reserved Worldwide

Zilliant provides B2B companies with data-driven guidance, enabling smarter pricing and sales decisions to help businesses make their numbers. The Zilliant optimization platform uses advanced science in its price optimization applications to enable companies to overcome the massive complexity in their businesses. Our flexible SaaS model allows customers to quickly and confidently improve their financial performance by integrating into existing systems and processes. Learn more about how Zilliant helps companies price more profitably and sell more effectively at www.zilliant.com.

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