Digital Marketing Final

customer life expectancy

1 / 1- customer retention rate * periods

PLV formula

CLV - A = (P / 1 + D - R) - A

Social CRM

CRM that includes social networking elements and gives the customer much more power and control in the customer/vendor relationship

current customer equity formula

N ( P / 1 + d - R)

CLV formula

P / 1 + d - R

recency, frequency, monetary

RFM; this method is commonly used in cases of repeat purchases, non contractual scenarios and is common in many smartphone apps

the customer profit chain

STP --> 4Ps --> customer perceived value --> customer acquisition, retention and development --> customer equity

resources

These should only be allocated where we can actually affect customer behavior

customers

______ are not created equal; they should be analyzed and treated according to their value to the company

compensatory model

a rational decision-making model for complex buying decisions in which choices are systematically evaluated on various criterial; weighted average

network externalities

a situation in which the usefulness of a product increases with the number of consumers who use it; the network effects

RFM analysis

a technique readily implemented with basic reporting operations to analyze and rank customers according to their purchasing patterns

individual customer analysis

advanced multivariate analysis techniques using information on the specific customer; includes regression analysis, advanced stochastic methods and data mining

customer centric marketing

aiming to proactively manage the ways individual customers, not only products, create profitability

psychological value

also called symbolic value; beyond the economic and function values

basic way to analyze value

benefits, weights and grades; customers make decisions based on different benefits and each benefit has its own importance (weight)

CLV to customer equity

combine the total CLV created by different cohorts

major elements of CLV

cost of acquisition, retention rate, discount factor, per period profit (revenue and costs), time horizon and who are our customers

current customer equity

current customer equity - the sum of the lifetime value of our current customers

customer equity factors

customer acquisition cost; per period profits; number of customers over time; customer retention; discount rate

customer centric approach

customer acquisition, customer development, customer retention

highly valued customers

customer experience is getting better for this group of people; example: first class customers, Chick-fil-A A-listers

customer total value

customer lifetime value; customer social value; customer insight value; customer support value

social value

customers have this if they are socially well connected and often recommend your product or service

non-contractual relationships

customers in retail or app users

contractual relationships

customers of platforms like Amazon Prime or Netflix

compensatory model results

decide which new products to develop, segment the market base on benefits, compare ourselves to competitors, see where we have a problem, see changes in consumer taste (over time), identify a difference between managers in the firm and customers

who the customers are

depends on the way in which the firm decides to define its customers; how many are there

activity based cost

enables allocating costs to be put associated with different customers

low tier customers

fire these customers; the company loses money on these customers; if they cannot be developed, firms are advised to charge them more for the service

qualitative methods

focus groups, observations, internet monitoring

customers

for firms whose main source of income is their ________, long-term customer equity should be highly related to firm value

segmenting customers by CLV

gather data to analyze current and future profitability, development firm-specific CLV model, categorize customers, develop distinct marketing approaches for each segment, allocate resources based upon segment CLV

mid tier customers

grow these customers; middle to low income customers; try and assess which ones you can development and invest in

firing customers

happens when firms get rid of bad, unprofitable customers

market share

historically, marketing has put an emphasis on customer acquisition and ______ _______

customer scoring models

historically, profitability was looked at through _____ _______ ________; these arrange the customers according to their expected profitability

monetary

how large were the customers purchases

frequency

how often did they purchase from us

online environments

in ____ ______ CLV time horizon can be a matter of days

why CLV is important

increasing attempts to use customer profitability analysis for estimating firm/customer base worth

lifetime value

is not possible to achieve if we do not supply value

the aim of firms

is to to maximize customer equity

strategic level analysis

large segment or company level analysis; average CLV

customer profitability based segmentation

marketers changed to this kind of segmentation because more information became available on customer profitability; marketers saw that the difference between customers in terms of profitability can be very large

linear

marketing isn't ______; like pinball

product centric approach

marketing mix; product, price, promotion, place

commodiites

materials, plants; not differentiated; sold on the base of pure supply and demand

present-day marketing

more individual level measures; share of wallet, etc.

the network economy

products and services are created and value is added through social networks operating on large or global scales

bad profits

profits that are earned at the expense of customer relationships

per period expected profit

revenues and costs; revenue is typically easier to assess per period

top tier customers

reward these customers; most valuable customers and the loss from defection is very high

historical teaching of marketing

segmentation, targeting, positioning --> 4Ps --> customer perceived value --> profits

value as an experience

service is used as a stage to engage individuals

data analysis

so many firms are product centric today because they lack _____ _______ ability

tech industry

the CLV is 3-5 for this industry

stable industries

the CLV is 5-7 for this industry

insurance or banking

the CLV is typically even longer than 5-7 for these industries

relational value

the advantage one has from continuing this specific brand; typically due to switching costs

value to the customer

the consumer's subjective assessment of the term-31utility of a brand, based on perception of what is given up for what is received; customers take into account the full range of costs and benefits

acquisition cost

the cost of getting new customers (advertising, discounts, subsidies); this should be spread over all customers that are actually acquired

always a share

the customer always us a portion of their business

lost for good

the customer may not come back in the near future; usually affiliated with contractual agreements

migration

the customer migrates among brands

customer lifetime value

the expected future worth of each individual customer

customer rage

the expression of mild to extreme anger about some aspect of the service experience

discount rate

the extent to which money in the future is worth less; NPV = P / (1+d)^t

recency

the last time the customer purchased from us

prospect lifetime value

the lifetime value of a potential customer

economic value

the monetary advantage from using a product versus its alternatives

customer lifetime value

the net present value of the future cash flows attributed to the customer relationship

10-15%

the percentage most commonly used for discount rate in the U.S.

share of wallet

the percentage of the customer's purchases made from a particular retailer

functional value

the performance features of a product

customer development

the process of making more money from existing customers; the effort to increase the profitability of current customers

customer retention

the process of retaining existing customers

customer acquisition

the process to get new customers

historical view of marketing

the product is front and center of the marketing activity; 4Ps; brand management and brand equity

retention rate

the ratio of retained customers to the number at risk in a given period; typically measured for a cohort (a group of customers acquired around the same time)

customer equity

the sum of the lifetime values of the firm's customers - current and future; EVERYTHING we do with customers aims to increase this

determinants of discount rate

the value of money over time (interest rate); risk associated with the cash stream; alternative investments for the firm

financial customer-related metrics

there is a move towards this; includes customer equity, firm value and firm profitability

recommendations

these are higher for satisfied complainants

average customers

this a myth that marketers might fall into; the actual goal is to find the best customers, cater to them and find more like them

value

this can change even if the product doesn't change; example: the pizza video where the seller changes the description to raise the price

overall profitability

this can increase for a company if dissimilar customers are treated differently

CLV time horizon

this changes depending on the product, market uncertainty or what CLV is used for

commodization

this happened because stiffer competition and weaker product-based differentiation led marketers to look for new sources of competitive advantage

value measurement

this happens by evaluating the set of benefits that are used in the consumers' decision making

connectivity

this has changed the power structure in markets; in just 60 seconds, millions of things happen among social networks

customer rage

this has greatly increased over the past forty years and has drastically affected revenue for businesses

customer profitability analysis

this includes determining investment in acquiring a new customer, ROI on marketing efforts and communicating the importance of customers to employees

word of mouth

this is higher for dissatisfied complainants

3 contacts

this is how many people, on average, customers need to talk to resolve a problem

technology

this is what has greatly altered marketing and has led to a radical new business model that alters the dynamic of customer service

20%

this percentage of customers is responsible for 80% of revenue

60%

this percentage of the shopping population consists of one-time buyers

money back, explanation or a repair

what most customers want after experiencing difficulty with a product or service

long-term customer equity

when looking in the long-term, some of our current customers will leave, but others will join; take into account the growth of the market and acquisition of new customer cohorts