itical issue. WHY Is CUSTOMER VALUE IMPORTANT TO CHURN ANALYSIS? One of the most important criteria to consider when making decisions about customers and handling churn situations, is what a customer is worth to the company. The more revenue a customer brings in, the more value that customer has to the company. Reasoning suggests that we should alter our churn planning SO that the more valuable customers receive more than their fair share of retention investment, while the least valuable customers get the least share of investment. To make optimum churn management decisions and to make these kinds of calculations, we need to have a technique that allows us to quickly identify how much value a particular individual actually offers to the company. WORKING WITH THE CUSTOMER VALUE FUNCTION We are now ready to actually build a usable customer value function (CVF) to incorporate into our churn strategy and planning. The CVF consists of several dimensions of the customer value calculation problem. The key components are: Revenue Credit risk and company interface behavior Utilization behavior Customer characteristics Future customer value categorization Chapter 13 These inputs will be used to generate a number of useful and interesting metrics, some of which could include: Relative value of customer index Relative value of customer ranking These metrics can then be included as one of the crucial components of any segmentation effort. When we use the same valuation metrics for all segmentation efforts, we guarantee that all of the specified segmentation models will treat customers consistently along this dimension. In the following sections we will elaborate on each one of these models and explore their use. PRINCIPLE COMPONENTS OF THE CUSTOMER VALUE FUNCTION The first step toward generating useful customer value function calculations is to assemble the various collections of input data necessary to make the function viable. Past Revenue One of the biggest mistakes individuals, attempting to develop a customer value funct