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Chapter 3 - Measuring & Identifying Profitable Customer.

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Amol Sheogaonkar
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9 views

Chapter 3 - Measuring & Identifying Profitable Customer.

Uploaded by

Amol Sheogaonkar
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Chapter 3 - Measuring &

Identifying Profitable Customer.


Amol Sheogaonkar
Objective

After this session the audience will


be able to demonstrate the
understanding of profitable customer.
● Customer is a business or individual who
consumes from other business.
● Customer loyalty is the aim of most businesses
● Understanding and knowing customers helps
build strong relationship for business.
● Customer segmentation is a way to group
customers according to demography, geography,
behavior and psychographic.
● Customer segmentation helps build better
product, sales strategies and focussed marketing.
Concept of Customer Care

Customer care deals in building relationships


so that they can increase their profitability at
the end of the day.

It is their customer-centric approach that


makes the consumers responds positively
Customer Care - Advantages

Customer Satisfaction Builds Trust

Solid Business Network Open Communication

Builds Loyalty Encourages Feedback

Deal Effectively with


Builds Relationships complaints
Customer Touch Points

A customer touch point is any direct or


indirect contact a customer has with a
brand. Customer touch points can occur
within and outside of a brand’s control
and may happen before, during or after
the purchase of a brand’s product or
service.

Customer touch points contribute to brand perception and customer loyalty.


Customer Touch Points - Examples

Under Customer Control Under Brand Control Under Neither Control

Visiting a Retail Store A TV Commercial Social Media Complaint


Customer Portfolio Analysis

● Not every customer have similar life time value (LTV)


potential.
● Companies should invest into relationship where LTV
potential is greatest.
● Customer Portfolio analysis is conducted to identify the high
LTV potential customers.
● A company’s marketing strategies ‘should encompass an
entire portfolio of customers at different relationship levels.
This process is called ‘customer portfolio management.’
Customer Portfolio Analysis - Process
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Customer Lifecycle

The customer lifecycle describes the various


stages a consumer goes through before,
during and after they complete a transaction.
Simply put, it's the Point A to Point B
journey a customer takes until they make the
final purchase.
Stages of Customer Lifecycle
Discovery

Customer begins to search the


solution.

Philip Kotler defined the idea of


customer 4.0, he made clear that Advocacy Education
to be competitive in the digital
A delighted customer Customer enquiries and
era, a company had to provide an becomes loyal promoter os learns about the solution
excellent buyer’s journey to its brand.

public.

Retention Conversion

Businesses try to engage Customer buys the solution


customer to make him repete
the purchase.
Customer Lifetime Value

Customer lifetime value is


the total worth to a
business of a customer
over the whole period of
their relationship.

Knowing the CLV helps businesses develop strategies to acquire new customers and retain existing
ones while maintaining profit margins.
CLV? CAC? CTS?

● If CLV is lesser than CAC (Customer acquisition


cost) the brand loses money.
● If CLV is lesser than CTS (Cost to service) the
brand will still lose money.
● Cost to service can be higher initially, however
later it normalises in case of high CLV customer.
● The brand can strategise its segmentation etc on
the basis of the CAC, CLV and CTS
Measuring CLV - Data Points
CLV can be measured in the following way:

● Average purchase value — the value of all customer purchases over a particular time frame (a year is
usually easiest), divided by the number of purchases in that period
+
● Average purchase frequency — divide the number of purchases in that same time period by the
number of individual customers who made a transaction over the same period.
+
● Customer value — the average purchase frequency multiplied by the average purchase value
+
● Average customer lifespan — the average length of time a customer continues buying from you
Calculating CLV
CLV = customer value X average customer lifespan

● The resulting CLV is a monetary value


● shows how much you can reasonably expect the average customer to spend
with you over their lifetime.
● A great frame of reference for everything from investments made into
improving a customer’s experience to optimising customer acquisition
strategy.
Recency, Frequency and Monetary Value Model (RFM)
Recency, frequency, monetary value is a marketing analysis tool used to identify a company's or
an organization's best customers by measuring and analyzing spending habits.

● Recency: How recently a customer has made


a purchase
● Frequency: How often a customer makes a
purchase
● Monetary Value: How much money a
customer spends on purchases
Recency, Frequency and Monetary Value Model (RFM)

RFM analysis numerically ranks a customer in


each of these three categories, generally on a
scale of 1 to 5 (the higher the number, the
better the result). The "best" customer would
receive a top score in every category.

Eg. Notifications, regular engagements, and loyalty points.


Summary

Customer Loyalty should be the ultimate aim of an organisation. It must periodically


evaluate customer lifetime value and keep it above customer acquisition value and cost
to serve to optimize profite.

CLV grows alongside customer life cycle.

RFM is an effective analytical tool to identify right kind of ad profitable customer for
the business.

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