CH 6 - Customer Relationship Management A Databased...

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Customer Relationship Management A Databased Approach V. Kumar Werner J. Reinartz Instructor’s Presentation Slides
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Chapter Six Customer Value Metrics: Concepts and Practices
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Topics Discussed Popular Customer-based Value Metrics Strategic Customer-based Value Metrics Popular Customer Selection Strategies Lift charts Cases
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Customer Based Value Metrics Customer based value metrics Popular Strategic RFM Past Customer Value LTV Metrics Size Of Wallet Transition Matrix Share of Category Reqt. Share of Wallet Customer Equity
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Size-of-Wallet Size-of-wallet ($) of customer in a category = Sj Where: Sj = sales to the focal customer by the firm j j = firm, = summation of value of sales made by all the J firms that sell a category of products to the focal customer Information source: Primary market research Evaluation: Critical measure for customer-centric organizations based on the assumption that a large wallet size indicates more revenues and profits Example: A consumer might spend an average of $400 every month on groceries = J j 1 = J j 1
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SCR (%) of firm or brand in category = Vij / Vij j = firm, V = purchase volume, i = those customers who buy brand = summation of volume purchased by all the I customers from a firm j, = summation of volume purchased by all I customers from all j firms Information source : Numerator: volumetric sales of the focal firm - from internal records Denominator: total volumetric purchases of the focal firm’s buyer base- through market and distribution panels, or primary market research (surveys) and extrapolated to the entire buyer base Evaluation: Accepted measure of customer loyalty for FMCG categories, controls for the total volume of segments/individuals category requirements; however, does not indicate if a high SCR customer will generate substantial revenues or profits Share of Category Requirement (SCR) = I i 1 = I i 1 = J j 1 = I i 1 = I i 1 = J j 1
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Computation of SCR Ratio - Example Total requirement of Notebook computers per customer A Total number of Notebook Computers purchased from ABC Computers per customer per period B Share of category requirement for ABC computers per customer per period B/A Customer 1 100 20 .20 Customer 2 1000 200 .20 Customer 3 1000 500 .25 Customer 3 has the highest SCR. Therefore, ABC Computers should identify customer 3 and target more of their marketing efforts (mailers, advertisements etc.) towards customer 3 Also, customer 3’s size-of-wallet (column A), is the largest
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Share-of-Wallet (SW) Individual Share-of-Wallet Individual Share-of-Wallet of firm to customer (%) = Sj / Sj Where: S = sales to the focal customer, j = firm, = summation of value of sales made by all the J firms that sell a category of products to a buyer Information source: Numerator: From internal records Denominator: From primary market research (surveys), administered to individual customers, often collected for a representative sample and then extrapolated to the entire buyer base
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This note was uploaded on 11/09/2011 for the course MAR 08 taught by Professor Staff during the Spring '08 term at Youngstown State University.

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CH 6 - Customer Relationship Management A Databased...

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