METHOD FOR VALUING CUSTOMERS AND CUSTOMER RELATIONSHIPS

A computer implemented method, a computer program product, and a data processing system are provided for valuing a customer or a customer relationship. Black-Scholes model for determining option value of stocks is adapted for use in valuing customers and customer relationships. Variables of Black-Scholes model are mapped to parameters relating to customers and customer relationships. A customer variance is determined for the customer relationship based on data about several customers. The value of a customer or a customer relationship is then computed by applying the customer variance and the mapped parameters to the Black-Scholes model. The computed value of the customer, or the customer relationship, is used in the decision making process to determine, among other things, which products and services to offer for sale to a customer, what the offering price to the customer should be, how much expenditures are to be allowed for the customer relationship, whether the customer relationship remains viable, perform on-going dynamic evaluation of the customer relationship, allocate marketing and advertising budgets, and suitability of business activities with respect to customers and customer relationships.