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
CLV contractual VS non-contractual model:
1 assumption each, 2 diff. treated factors
lost-for-good VS always-a-share assumption
consideration of varying CF, retention probability:
C indirect direct
NC direct indirect
static VS dynamic perspective to CE mgmt
Differential treatment of high-value and low-value customers in terms of the 4Ps (or the 7 Ps, respectively)
§ No-cost upgrades
§ Selection for downgrades/ denied services
§ Differential complaint handling
§ Waiting time in call-center
§ Short-hand appointments
§ Loyalty program status, rights, and extra awards
§ Key Account Manager (B2B) or specialized customer service
§ Special phone number for high-value customers
§ Added services
VS
Focus on Increasing Customer Equity on its measurable dimensions
§ Increase relationship length
• Customer Satisfaction, Attitude, Trust, Perceived Value
• Loyalty programs
• Loyalty management (satisfaction, trust, repurchase intention)
§ Increase relationship breadth
• Customer Satisfaction, Attitude, Trust, Perceived Value
• Cross-buying efforts (–> next product to buy models)
§ Increase relationship depth
• Customer Satisfaction, Attitude, Trust, Perceived Value
• Increase purchase frequency or accelerate purchase
• Increase purchase value (stimulate upgrades)
§ Reduce per-customer costs
• Migrate to self-service
• (selectively) charge service fee
7 goals to which CLV analysis can be applied, replacing older cruder measurements
- New Customer Acquisition
- Complaint Management/ Regainment
- Direct-Marketing
- Satisfaction-/ Quality increase
- Brand Extension
- New product introduction
- Alliance/ M & A (merge and acquisition)
barriers to CE mgmt
3+5
§ Information and prediction problems
§ Availability of information on individual customer level
- Revenue information
- Cost information
- Behavioral information
- Marketing investment information
- Predictions
§ analytical skills & data integration & information management capabilities
customer mgmt:
narrow & broad defs + goal
Definition
• Narrow: Managing detailed information about individual customers and carefully managing customer “touchpoints” in order to maximize customer loyalty.
• Broad: Overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.
goal:
more focused communication thanks to integration of diff. data sources
