Performance management using a value-based customer-centered model

Abstract

Performance management (PM) and customer management were the subjects of researchers’ attentions for several decades. This research tries to align these two approaches to provide strategic decision-making. The proposed approach suggests an integration of customer relationship management system incorporating PM system considering maximisation of customer lifetime value (CLV) metric. For this, a model is being developed to align PM and customer management. For customer management, we cluster customers based on four dimensions which are product combination, activity level, retention rate and CLV. This combination of attributes has not been used before and can bring more useful information. For example, it can reveal which product combination can pinpoint profitable, loyal and active customers. This helps for the prevention of customer migration. However, the main novelty of this research is proposing the application of CLV as a financial metric in strategic PM in an integrative approach. The research model has been applied in an Iranian commercial retail bank. In the implementation, various techniques and mathematical models including genetic K-means, analytic hierarchical processes and data envelopment analysis have been used.

Keywords: customer lifetime value (CLV)customer segmentationcustomer retentionretail bankingperformance managementdata envelopment analysis (DEA)