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Dec. 21, 2004

Not all customers are created equal, nor are they all good business. So with finite funds available, how does a company decide where to make its customer investments? Federal Express Corp., Memphis, is beginning to answer that question by calculating the potential lifetime value of accounts and allocating marketing expenses against them accordingly. Individual account profiles are established by combining transaction history (origin/destination, weight, nature of package, etc.), phone interviews to determine competitive entrenchment, and third-party data to determine company growth rates. This model is compared to models FedEx has already established for companies in the same industry to derive an estimate of lifetime value to FedEx. "We cannot afford to give personalized attention and customized service to millions of accounts," says Jim Liske, director of marketing. "That's where our database and customer-relationship marketing techniques have flourished. Lifetime value guides how to take limited resources and invest them against a two-million-customer base. This approach is head and shoulders above any other marketing approach we have used in terms of increasing account profitability and customer satisfaction. We have been doing lifetime value and investment calculations for 12 to 18 months, and in certain segments we have treated with marketing programs based on this information, we have more than doubled profitability."

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