1. Convergys, a leader in contract-based business process outsourcing services, has been successful in acquiring high-profile customers (e.g. Verizon, FedEx & Starbucks, among others) across a wide variety of industries. Despite Convergys’ impressive customer list, the company has seen its operating margin decrease about 20% over the past 5 years. Key decision makers within the company believe that this decline is due, at least in part, to issues relating to client retention and acquisition strategies.
At present, Convergys classifies its customer accounts into 3 tiers: A, B & C. “A” customers are considered to be of highest value, followed by “B” and “C” customers. Although the idea of …show more content…
The EV as proposed by Brent Carlson certainly takes into account two key metrics in evaluating the worth of a client’s relationship: i) The length of the business interaction ii) The revenue per year
These values, though important, lack the insight that can be gained by bringing in variables outside of the scope of the current business contract. For example, these measures do not take into account the opportunity for Convergys’ further penetration of existing clients’ accounts, for revenue increase through product pricing adjustments, for service expansion through new offerings, or for increasing client satisfaction by quickly responding to changing client needs.
Furthermore, this EV indicator assumes a static business relationship length and under-weighs negative flows incurred from existing customers’ switching to a competitor and positive flows from existing customers staying further than anticipated.
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