Session 16 - Customer Value

Session 16 - Customer Value - Customer Value Session 16...

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1 Customer Value Session 16 Introduction to Marketing Professor Greenleaf Fall 2011
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Session 14 – Customer Value 2 Today’s Agenda What is customer value and why is it important to firms? Forecasting customer value Using customer value strategically
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3 1. What is customer value and why is it important to firms?
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Session 14 – Customer Value 4 What is customer value? Think of third component of marketing concept Marketing helps firms achieve objectives Customer value is the economic value of a customer to the firm Includes NPV of future profits from customer Firms must attract high-value customers to flourish
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Session 14 – Customer Value 5 Benefits of high customer value Dec. 2004- Sprint announces it will buy Nextel for $35bn A boon for Nextel shareholders What made Nextel an attractive purchase? High-value customers
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Session 14 – Customer Value 6 NYT, 7/12/04, p C1 Nextel #6 in revenue
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Session 14 – Customer Value 7 Highest revenue per customer and second lowest customer turnover
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Session 14 – Customer Value 8 Customer turnover for cell phone brands - 2011 Macrumors 9.22.11
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Session 14 – Customer Value 9 Customer value can make or break a firm Amazon spends lavishly to attract customers – e.g. email coupons Amazon losing lots of money Then Jeff Bezos writes famous memo – “We have to get the cr*p out.” Amazon finally starts making money
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Session 14 – Customer Value 10 Not all internet firms were as fortunate Were they being silly? No. Wall Street was valuing firms based on number of customers, not customer value There were exceptions to this attitude
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Session 14 – Customer Value 11 What can we learn from this? It is not enough to have lots of customers To survive in the long term, firms need valuable customers A good first step is understanding how to forecast customer value
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12 2. Forecasting customer value
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Session 14 – Customer Value 13 Key components of customer value 1. Attraction costs 2. Net margin on first sale 3. Retention costs 4. Net margin in future periods 5. Forecast: Add up 1-4, with discounting Let’s look at an example
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This note was uploaded on 04/05/2012 for the course STERN MKTG-UB.1. taught by Professor Greenleaf during the Fall '11 term at NYU.

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Session 16 - Customer Value - Customer Value Session 16...

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