L4 Quantifying Customer Behavior Flashcards
long term trends in marketing, in 2 phases
+ 3 key attributes
focus shifting from product to clients to service/relationship
+ intangibility, exchange processes, and relationships
customer loyalty:
def
+ 1 key property
+ 4 key dimensions
+ 1+1(=2) ways to measure them
“A deeply held commitment to rebuy or repatronize a preferred product or service consistently in the future, despite situational influences and marketing efforts having the potential to cause switching behavior”
+ fundamentally multidimensional
+ intent to: (from ‘near’ to ‘far’)
- stay even if price increases
- repurchase
- cross-buy
- give good word of mouth
- …
+ ways to measure:
- attitudinal
= forward-looking survey Qs - behavioral
= backward-looking survey Qs OR customer DBs
trendy “Net promoter score”
- def
- who
- how
- scale
- practical appeal
- application
- drawbacks
- “how likely are you to recommend X to a friend or colleague?”
- by Bain&Co’s Keiningham
- for example measured w smileys after service
- 1-6=detractor; 7-8=passive; 9-10=promoter
- easy to measure w 1 Q
- used by consultants to generate biz
- …but less explanatory & predictive power than multiple customer loyalty questions
Customer loyalty measures help…
…segment n decide where to focus
Taxonomy of Customer Value Models
2x2dims –> 3+1 + 3+1
one-dimensional
- past-present oriented
- ABC Analysis
- Customer contribution margin/cost accounting
- Customer past revenue
- future oriented
- CLV
multi-dimensional
- past-present oriented
- RFM (=Recency, Frequency, Monetary) Model
- Scoring Models
- Customer portfolios
- future oriented
- CLV & CE
Customer Lifetime Value:
- 2 model features
- diffs bw Cos & bw key Co types
- 2 features:
- high sensitivity to fee level –> special focus on customer retention
- single customers’ behavior is very difficult to foresee, but masses can be predicted to some extent
- names are not standardized, and thus change, across Cos
- a big diff is bw:
- contractual businesses, e.g. utilities & telecom –> typically time horizon = 24m
- non-contractual businesses, e.g. retailers & airlines –> loyalty programs, invented by airlines, to become quasi contractual
CLV & market valuations of tech Cos where user base is the main asset: 2 considerations
- CLV ~= market_cap / UserNo (assuming no costs and no other assets)
- in reality, the valuation also factors in assumptions in growth of CLV & of UserNr
CLV
3 main dims
+ 2 further components w drill-down
- 3 dims of C relationship:
- lenghth
- breadth
- Cross-Buying
- Value Added Services
- depth
- Frequency
- Value (e.g., Up-Buying, Price Premiums)
- **Customer Costs
- ASC***
* **A**cquisition costs * **S**ervice and support costs * **C**omplaint behavior * **Hard-to-measure positive components
- WRIC***
* Customer Word-of-mouth value
* Reference value
* Information value
* Cooperation value
general shift in marketing from old to new method:
focus moved from customer Nr to CLV metrics
CLV determinants:
3 + 4 - 3
3 dims:
- Relationship length (duration <= loyalty)
- Relationship breath (usage)
- Relationship depth (cross-buying, add-on service)
+ 4 features difficult to quantify: cric
- Customer word-of-mouth-value
- reference value
- information value
- cooperation value
- Customer costs “in order”
- acquisition costs
- including service and support costs
- complaint behavior
CRM def=
Managing a company’s interaction with the customers, often by analyzing customer data of different sources.
CEM goals & customer categories along 2 dims
Companies should manage customer equity carefully. But not all customers, not even all loyal customers, are good investments. Some loyal customers can be unprofitable, and some disloyal customers can be profitable. The goal is to build the right relationship with the right customers.
2 ways to measure customer loyalty
Customer loyalty can be measured through attitudes and behavior
=> past VS future
but also
stated potential VS actual
CRM def
Relationship marketing - aka CRM - is about the profit-oriented establishing, (maintaining,) broadening, and – if necessary – termination of customer relationships.
CLV formula
CLV = Sum_i
predicted_active_probability_i * predicted_cash_flow_i /
discount_rate_i
