Calculating the Economic Value of Customers to an Organisation

Three case studies from Australasian service organisations explore the economic value of customers to an organisation (EVCO). Customer lifetime valuation, a form of discounted cashflow analysis, was used in two of these organisations. Customer profitability analysis, a form of activity-based costing, was used in the third. Insights arising from the measurement of EVCO changed the management of customer relationships - new pricing strategies were introduced and loyalty and product crossholdings were rewarded, for example. It is interesting that there was little or no involvement by the accounting function in the calculation of EVCO