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1. PUBLISHED BY
SUNIL GUPTA

2. AGENDA
INTRODUCTION
TWO SIDES OF CUSTOMER VALUE
CUSTOMER LIFETIME VALUE
CUSTOMER ACQUISTION
CUSTOMER RETENTION
CUSTOMER EQUITY

3. AGENDA
IMPLICATIONS FOR
ORGANIZATIONAL
STRUCTURE
CUSTOMER
REFERRAL
VALUE
VALUE OF A FREE
CUSTOMER AND
SOCIAL
INFLUENCE
CONCLUSION

4. 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.

5. TWO SIDES OF CUSTOMER VALUE

6. 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.

7. CALCULATION OF CLV
Estimation of CLV is heavily dependent on:
 Annual profit per customer
 Customer retention pattern

8. CALCULATION OF CLV

9. CALCULATION OF CLV

10. CALCULATION OF CLV

11. 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.

12. 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.

13. 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.

14. Customer Development
o 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

15. 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.

16. 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.

17. Conclusion