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Slide 1: 1 Entire contents © 2007 Forrester Research, Inc. All rights reserved.

Slide 2: What are your customers really worth? Mary Beth Kemp Principal Analyst Forrester Research

Slide 3: 3 Entire contents © 2007 Forrester Research, Inc. All rights reserved.

Slide 4: Agenda • Lifetime value is no longer enough • Understand your customers’ social value new • Recognize your high-value customer v 4 Entire contents © 2007 Forrester Research, Inc. All rights reserved.

Slide 5: Theme No consumer is an island…and you’ve got to value their network 5 Entire contents © 2007 Forrester Research, Inc. All rights reserved.

Slide 6: Lifetime value unlocks customer potential . . . Customer spend Year 1 Year 2 Year 3 Time 6 Entire contents © 2007 Forrester Research, Inc. All rights reserved.

Slide 7: . . . but is missing an important dimension Consumer connect to other consumers In the last month, I forwarded a promotional email I provided a friend's email/name Customer Dynamics to enter them into a prize I rely a lot on recommendations from family and friends when making purchases Sent a link to a friend Consumer reviews provide reliable advice about buying products 0% 10% 20% 30% 40% 50% 60% 70% Source: European Technographics® Benchmark Survey, Q2 2007 7 Entire contents © 2007 Forrester Research, Inc. All rights reserved.

Slide 8: Nintendo Wii and alpha moms 8 Entire contents © 2007 Forrester Research, Inc. All rights reserved.

Slide 9: Dell’s customers support others 9 Entire contents © 2007 Forrester Research, Inc. All rights reserved.

Slide 10: Agenda • Lifetime value is no longer enough • Understand your customers’ social value new • Recognize your high-value customer v 10 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 11: Social Technographics® shows consumer participation European online adults Creators 10% Critics 19% Collectors 9% Joiners 13% 40% Spectators Consumers participating in Base: European at least one of the activities 53% Inactives online adults at least monthly Source: European Technographics® Benchmark Survey, Q2 2007 11 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 12: How consumers connect 12 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 13: Different networks have different scales and dynamics Community Entwined Public Intimate Proximity Loose 13 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 14: The connections have different values Community Entwined High value Highest value Wide reach Low reach Remote contact Close contact High affinity High affinity Public Intimate Proximity Low value Medium value Wide reach Low reach Remote contact Close contact Low affinity Low affinity Loose 14 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 15: The connections have different values Community Entwined High value Highest value Passion forum Member-get-member flickr or gather.com group Personal recommendation A blog with regular Public readers/contributors Email, IM, phone call Intimate Proximity Low value Medium value Comments section on Send to a friend general news stories Forwarded promotion A wide-reaching LinkedIn network Humorous viral messages Loose 15 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 16: How a customer’s social value adds up • Social Value Score Card 1. Brand/Category knowledge and involvement 2. Types of connections and their value 3. The number contacts 16 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 17: socially Who are the mostvvaluable customers? Helene, 24; Véronique, 35; she is pregnant with her second child is her first child nine months old 17 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 18: Véronique is much more socially valuable Simplified Social Scorecard Hélène Véronique Knowledge 2 Knowledge 4 Involvement 4 Involvement 5 K/I Index 3 K/I Index 4,5 Total Total Connections Value Contacts Weight Connections Value Contacts Weight Facebook SN 2 30 60 Writes parenting blog 2 50 100 Parenting forum 3 20 60 Parenting forum 3 200 600 commenter School parent's council 5 20 100 Connection score 120 Son's playgroup 5 6 30 Connection score 830 Social Value Score 360 Social Value Score 3735 18 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 19: socially Who are the mostvvaluable customers? Sabre, 35+; Jacques, recently retired; addicted gamer likes games, also invests online 19 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 20: Demographically different, socially similar Simplified Social Scorecard Sabre Jacques Knowledge 4 Knowledge 5 Involvement 5 Involvement 4 Knowledge/Involvement score 4,5 Knowledge/Involvement score 4,5 Contact Connections Value s Weight Connections Value Contacts Weight Facebook SN 1 23 23 Blog Reader 4 0 0 Linked-in Network 1 40 40 Investment forums 4 120 480 MMORPG Game 4 60 240 Gaming forums 4 8 32 Gaming forum 4 50 200 MMORPG Game 4 12 48 Game Guild 5 15 75 Forwards emails 3 6 18 Photo forum 2 20 40 Member get member 5 5 25 Connection score 618 Connection score 603 Social Value Score 2781 Social Value Score 2714 20 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 21: Agenda • Lifetime value is no longer enough • Understand your customers’ social value new • Recognize your high-value customer v 21 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 22: 1. Work the network • How are your customers participating? • Who seems to be playing the game? 22 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 23: 2. Measure customers’ social value • Understand the dynamics and the connections — map how the communities are structured • Identify and track the social consumers in your database • Measure their interactions with a simple social value scorecard 23 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 24: 3. Identify your (new) high-value customer + Core buyers Ambassadors Lifetime (or financial) value Misers Influencers 0 0 Social + value 24 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 25: 4. Encourage the network 25 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 26: Summary • “High-value customers” must be redefined, adding a social dimension. • Marketers must understand how consumers participate, interact, and connect • Identifying and activating your (new) high-value customer will be hands-on . . . but worth it 26 contents © 2007 Entire Forrester Research, Inc. All rights reserved.

Slide 27: Thank you Mary Beth Kemp mbkemp@forrester.com www.forrester.com 27 contents © 2007 Entire Forrester Research, Inc. All rights reserved.