Customer Lifetime Value

Customer Lifetime Value - Customer Delivered Value Costs...

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Customer Delivered Value Costs Psychic Energy Time Monetary Total Value Image Personnel Services Product Total
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Why Satisfaction Is Not Enough Are your customers satisfied? How do you know? Could your customers be more satisfied? What are you doing about this? What about your competitors?
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Customer Relationships Customer Relationship Management (CRM) – process of managing information about customers and managing all customer touch points Touch point – customer encounters brand, product, personnel How many bugs are one bug too many?
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Customer Relationships Framework for one-to-one marketing 1. Identify prospects and customers 2. Differentiate customers with respect to their needs and their value to your firm 3. Observe/interact with individual customers to learn 4. Customize products, services, messages
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Transaction-Focused vs. Relationship-Focused Selling Selling Element Transaction-Focused Selling Relationship-Focused Selling Focus Solicitation of one-time sales Customer retention Performance measures Return on Investment (ROI), value of sales, batting average Lifetime value Orientation Transactions Customer relationships Time horizon Short-term Long-term Customer service Little emphasis as transactions are key Strong emphasis as long-term relationships are key Source: Adapted from Sargent, Adrian (2001), “Customer Lifetime Value and Marketing Strategy: How to Forge the Link,” The Marketing Review , 1, 427-440.
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Customer Relationships Reduce rates of customer defection – deliver personalized service Increase longevity of relationships – involve customers Enhance customer growth potential – cross-sell, up- sell Make low profit customers more profitable – terminate, reduce features, pay more
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Customer Relationships Reduce Customer Defection 1. Know the retention rate – define it 2. Understand causes of defection and ascertain which can be managed 3. Estimate profit lost when a customer defects 4. What will it take (cost) to reduce defections? 5. Listen to customers
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“Not everything that can be counted counts, and not everything that counts can be counted” Albert Einstein
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Customer Lifetime Value Customer Equity – total of discounted lifetime values of all the firm’s customers Value – customers’ assessment of utility Brand – customers’ assessment of image Relationship – customers’ willingness to stay with brand
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Congratulations, You’re Hired! Customer A Purchase – $5,000 Makes 1 purchase per year Signed a 5 year contract Uses our product in a non-critical support role Provides exposure for our product to thousands of potential customers each year Customer B Purchase - $1,000 Makes 1 purchase a month Signed a 2 year contract Uses our product as part of their key service to their customers Once purchased our product is only seen by this customer
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How much are you, as a customer, worth over your college lifetime? $960 at a pizza parlor over your years in
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This note was uploaded on 12/21/2010 for the course BUSA 5336 taught by Professor Jeff during the Summer '09 term at UT Arlington.

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Customer Lifetime Value - Customer Delivered Value Costs...

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