CH 13 - 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 Thirteen Application of the Customer Value Framework to Marketing Decisions
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Topics Discussed Optimal Resource Allocation across Marketing and Communication Strategies Purchase Sequence Analysis: Delivering the right message to the right customer at the right time The link between Acquisition, Retention and Profitability
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Optimal Resource Allocation Customer Equity: Aggregation of expected lifetime values of a firm’s entire base of existing customers and the expected future value of newly acquired customers The NPV objective function required to maximize the Customer Equity of a firm is related to The cash flow from each customer The expected Inter-purchase time The cost and frequency of marketing/communication strategies employed
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Optimal Resource Allocation (contd.) The NPV objective function required to maximize Customer Equity of a firm is based on three elements: A probability based model that predicts the inter-purchase time of each customer A panel data model that predicts the cash flows from each individual customer An optimization algorithm that maximizes the profits from each individual customer
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Real World Industry Application of Optimal Resource Allocation By applying an optimization model, a manager can know: The extent to which face-to-face meetings should be decreased and frequency of direct sales increased or vice-versa How to maximize profits across various customer segments Two-step approach: Develop model and check predictive accuracy Examine the improvements in profits
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Actually Bought in the next 12 months Actually did not buy in the next 12months Total Expected to buy in the next 12 months as per the model
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CH 13 - Customer Relationship Management A Databased...

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