CUSTOMER MANAGEMENT

PUBLISHED BY SUNIL GUPTA

AGENDA

INTRODUCTION

TWO SIDES OF CUSTOMER VALUE

CUSTOMER LIFETIME VALUE

CUSTOMER ACQUISTION

CUSTOMER RETENTION

CUSTOMER EQUITY

AGENDA

IMPLICATIONS FOR ORGANIZATIONAL

STRUCTURE

CUSTOMER REFERRAL

VALUE

VALUE OF A FREE CUSTOMER AND

SOCIAL INFLUENCE

CONCLUSION

INTRODUCTION

LARGE AND DYNAMIC CUSTOMER DATABASE IS KEY TO ORGANIZATION SURVIAL AND ITS PROFITABILITY.

CUSTOMER DELIGHT IS CRITICAL TO RETAIN THE BUSINESS.

DEVELOP,ACQUIRE RIGHT CUSTOMER BASE AND RETENTION IS IMPORTANT TO ORGANIZATION.

SELECT RIGHT , TRUSTED AND VULNERABLE CUSTOMER BASE AND PROVIDE EXTRA BENEFITS AND VALUE IS KEY TO SUSTAIN.

TWO SIDES OF CUSTOMER VALUE

CUSTOMER LIFETIME VALUE

CLV is present value of all future streams of profits that an individual customer generates over the life with the firm.

CLV can be used as to distinguish high value customers to low value customers.

Customer lifetime value is based on profits not revenue.

CLV helps managers to take investment decisions and it is the measure of customer profitability in long term.

CLV is individual customer level approach and firm utilized it to calculate the profitability and retention rate of each customer.

CALCULATION OF CLV

Estimation of CLV is heavily dependent on:

Annual profit per customer

Customer retention pattern

CALCULATION OF CLV

CALCULATION OF CLV

CALCULATION OF CLV

CALCULATION OF CLV

We can simplify calculation by considering some assumptions-1. Customer have a constant profit margin (m) over time.2. Constant rate of retention ®.3. Constant discount rate.4. Value is estimated over infinite horizon.

Then, CLV = m.(r/1+i-r) Here r/1+i-r is margin multiple.

CUSUTOMER ACQUISITION

“If you are not focused on how will you acquire your customer and more importantly at what cost – than it is very hard to build a business and even harder for us to assess whether or not you even have a business” (CHARLIE O’DONNELL) 20% of customer provides 80% of organizational revenue. Strategies to acquire maximum customer:- Increase market size.- Increase marketing investment.- Increase effectiveness of acquisition program- Offer discounts and incentives- Generate positive world of mouth.

Customer Retention Customer retention rate is the rate at which customer

stay with an organization for a given period.

It depends upon measure of customer satisfaction and loyalty.

EXPECTED CUSTOMER LIFETIME=100%/100%-R 100%-R= Churn rate. Customer satisfaction program, identify the right customer and

provide them mutual benefit is essential for customer retaining.

NPS(Net promoter score is a program to improve customer management efforts.

Customer Developmento Once, customer is acquired and retained, It is too important to increase

customer profitability by deepening the customer relation.

o According to surveys, it costs ten times more to acquire new customer rather than maintain trustable customer base.

o Concepts useful for garnering existing customer are:

- Share of wallet

- Cross selling and upselling

- Redefining the business

CUSTOMER EQUITY Customer Metric is the firm level metric that summarizes

the entire customer base.

It represents the total CLV across all existing and future customers.

Future customer can be predicted on the current growth of the company, competitive environment and customer acquisition investment.

Customer equity indicates organization’s long term value and it guides marketing investment decisions.

Customer referral value

Two customers have same CLV , but represent different value to the company if they have different impact through word of mouth.

One way to increase referral to provide incentives to the customer.

Conclusion

Submitted BY Anand Ayush