5.7 customer equity Flashcards
Customer life time value (CLV): The value a customer represents over his entire lifetime with the firm: 3
- Income generated through customer over period
- Costs incurred to generate those incomes over same period
- Length/frequency of occurrence
CLV Calculated through average of: 3
- Entire customer base current/potential => proxy for company value
- Segment => differentiation
Some segments represent an higher value for the company than other segment - Individual customer => consumer insights and differentiation
Make smaller subgroups based on communalities
Measurement of CLV (silveria)
Two ways of calculating
Bottom up: use customer data Top-down: when you don’t have all the data
Bottom up: use customer data 3
- Customer level data
- Summing up to segment or company level outcomes
- More data requirements
Top-down: when you don’t have all the data 3
- Segment or firmlevel data
- Calculate average CLV per customer
- Multiply by expected customers
Customer based evaluation models: based on
what we know what the customer spend on us can we calcualate what the company is worth now and in the future
ce component drivers 3
value, brand, relationship equity
Marketing action level: if you have the right data you can
predict how investment can come valuable
Silveira: measurement of CLV
BBDM
2
bottom up behaviour based datamodel
- More applications – analysis levels
* but more complex data gathering
Silveira: measurement of CLV MBBM: Top-down
Market Based Data Method
* Simpler method
* but more restrictive
Customer lifetime value (CLV) and customer equity (CE) are long-term oriented
metrics
3
- To measure CLV/CE is often challenging
- Different assumptions lead to different outcomes
- Although main outcome of BBDM and MBDM are remarkably similar
Value, brand, and relationship equity are reflected in customer equity
- Customer retention is one of the key drivers of CLV and firm profitability.
- Using behavioural data can give results on many different levels
