Customer Due Diligence – Lesson 2: Financial Information is Imperative


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In my last blog, I started a list of lessons learned from working with a number of companies on customer diligence projects. The first lesson was all about the importance of having good lists. The next lesson is about having financial information to guide your decisions.

Lesson 2: Having financial information is imperative

In order to properly assess the risk that the acquirer assumes in the transaction, we must be able to provide guidance on the probability of revenue flight risk. Walker’s Loyalty Matrix , coupled with customer-level sales or revenue data, will provide this level of insight.

However, it goes beyond just the revenue flight risk analysis. The key to interpreting the results is understanding who is represented in the analysis, and the extent to which they look like the customer population overall (or the extent to which they represent a large portion of the customer population). The customer-level financial data allows us to assess how representative our results are (and the extent to which major accounts have been included). These are important pieces of information that the acquirer must have in order to properly assess the validity and value of the due diligence exercise.

This is the second in a series of lessons learned conducting advanced customer due diligence. Watch my blog in the coming weeks for other key lessons. They will be available here.

Republished with author's permission from original post.

Mark Ratekin
Mark is responsible for assisting clients in identifying and quantifying the financial linkage of their customer loyalty management programs. He plays an active role in translating program findings and conclusions into actionable recommendations and works with management and employees to facilitate the implementation of program findings into quality improvement strategies.


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