This document discusses measuring customer productivity using Customer Profitability Analysis (CPA) and Customer Lifetime Value (CLV) models. It outlines factors that affect customer productivity and the importance of measuring it. CPA is defined as allocating revenues and costs to calculate customer segment or individual profitability. The document provides a hypothetical example to interpret CPA, calculating profits for different regions. It then defines CLV as the projected future cash flows from a customer relationship. An example interpretation of CLV calculates the value over 5 years for customers from different regions, assuming sales, costs and retention rates increase annually.

1. “Customer productivity
measurement using CPA and CLV model”
# CPA= Customer Profitability Analysis
# CLV= Customer Lifetime Value
A Report on

2. Presentation Outline:

3. Customer Productivity & measurement
Productivity is an economic term describing the relationship between outputs
as compared to inputs needed to produce those outputs . It’s a measure of
efficiency. And customer productivity is the measures of revenue which is
generated by a customer.
Productivity measurement is commonly defined as a ratio of a volume
measure of output to a volume measure of inputs use.

4. Factors affecting productivity
1) Capital investments in production
2) Capital investments in technology
3) Capital investments in equipment
4) Economies of scale
5) Technological changes
6) Quality of products
7) Quality of management
8) General levels of education
9) Social environment
10) Geographic factors

5. Importance of Customer Productivity
measurement
1) Efficiency of production
2) Maximizing Productivity
3) Income distribution
4) production Process
5) Monetary Process
6) Market value
7) Consumers translates to higher Profits

6. Customer Profitability Analysis (CPA)
Customer Profitability Analysis refers to the allocation of revenues and
costs to customer segments or individual customers, such that the
profitability of those segments and/or individual customers can be
calculated.

7. The key benefits of CPA for business:

8. Interpretation of CPA
Firstly we assume a company sells its product laptop Dell to different regions. From these we take three
regions for customer productivity measurement by using CPA and CLV model. There are three regions for
distribution channel including Barisal, Patuakhali, and Dumki. Then we take all data hypothetically. These are
given below:
Sales unit: 500 units, 450 units and 300 units consecutively for Barisal, Patuakhali, and Dumki regions.
Sales price: per unit 40,000 taka
Variable Cost:
 Direct material 14,000 taka
 Direct labor 3,500 taka
 Variable selling 1,000 taka
 Sales commission 500 taka and
 Other cost 200 taka per unit are fixed for each regions.
Fixed Cost:
Advertising cost 25 lakh taka and
Selling and administrative expense 32 lakh taka for each region.

9. Customer Profitability analysis

10. Continue..

11. Customer Lifetime Value
Customer lifetime value can be defined as the dollar value of a customer
relationship, based on the present value of the projected future cash flows
from the customer relationship. Customer lifetime value is an important
concept in that it encourages firms to shift their focus from quarterly profits
to the long-term health of their customer relationships.

12. Advantages of CLV
 Customer relationship as an asset.
 Monitoring the impact of management strategies and marketing
 Optimal level of investments.
 Focus long-term value of customers.
 Sensitivity analysis of customer.
 Optimal allocation of limited resources.
 Communication strategies.
 Measurement of customer loyalty.

13. Interpretation of CLV:
We calculate Customer Life time value for 5 years and all the data are taken by
hypostatically.
Assumption:
 Sales will increase at 10% every year
 Variable cost also will increase at 10% each year.
 Fixed expenses will remain constant for each year
 Other Market components also remain constant each year.
 Discount rate will be at 10%
 For calculate customer Life-time Value we take many customers from verious
region. First we take Barisal region and we select 500 customers and their
average acquisition cost 2000 for each customer then we select Patuakhali and
select 200 customers with 10,000 their acquisitions cost and finally we select 200
customers and their acquisition cost 25000 tk. each. We assume the retention
rate 60% for 2016 and 5% increase for following years for every segment. Then
we finally calculate the customer life-time value using be this information.

14. Calculation of CLV

15. Continue…

16. Continue…

17. Continue..

18. Continue…

19. Continue…