Customer Value

For any given company, a customer represents 2 values.

1. Realized Value: This is the $ value of profit that the customer contributed to the company's bottom line for a given period.

2. Potential Value: This is the $ value of profit from lost opportunity during the same given period. The lost opportunity could have been lost to a competitor or its still not realized by anyone.

If companies are able to derive these 2 values (Realized Value & Potential Value), then the company can device various strategy to increase the "Realized Value" from the customer.

Once we get these values, the following questions need to be answered:

1. Which customer should the company give more importance to? Is it for customers with higher Potential Value or customer with higher Realized Values.
2. What kind of service levels should we maintain for each of these 2 segments
3. Should we perceive the $ value alone or should we standardize them to a % value. In other words, Realized Value + Potential Value = 1.