Customer Value Ladder

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Customer Value Ladder

Description

The purpose of a Customer Value Ladder is to segment customers according to the value that they represent to your brand. This type of framework can be used to segment your current customers according to different actions and attributes that determine value. A version of this framework can also be used to segment prospective customers according to different qualifying attributes and their level of demonstrated interest in your brand (commonly referred to as Marketing Qualified Leads or Sales Qualified Leads). The Customer Value Ladder is particularly useful for brands that have a long-term, service-based relationship with their customers such as financial institutions, telcos, and SAAS businesses. Updating the framework over time allows you to better understand how your marketing is impacting value as customers move up and down the ladder.

 
Questions

How are we increasing the value of our customers over time? 

 
Steps

  1. Define the group that you will be measuring and segmenting. This may be current customers, prospective customers, or business accounts. Groups must be identifiable and measurable.
  2. Identify the identifiable Attributes that impact the value of a customer to your brand. These are factors that relate to your ability to grow (e.g., disposable income) or retain (e.g., life stage) your customer over time.
  3. Identify the measurable Actions demonstrated by your customers that impact value to your brand. These may be transactional (e.g., annual spend) and non-transactional (e.g., level of engagement).
  4. Identify the Attitudinal measures that impact the value of a customer to your brand. These are factors that relate to current levels of satisfaction (e.g., customer feedback) or loyalty (e.g., NPS scores).
  5. Assign a value for each Attribute, Action, and Attitude included in your framework based on its relative impact on value. Score all of your customers and analyze the distribution of the results.

 
Considerations

  • All Attributes, Actions, or Attitudes need to be measurable and connected to individual customers.
  • Start with a simple framework to ensure that the benefits outweigh the costs of managing the data.
  • Separate or different versions can be used to analyze attributes, actions, or attitudes separately.
  • Create your segments based on groups that are large and distinct enough that you will treat them differently.

 
References

Gordon, Ian H. Managing the New Customer Relationship. Wiley, 2013

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