This document discusses strategies for increasing the lifetime value of customers. It begins by explaining how to calculate the annual profitability and lifetime value of customers. Customers are assets that provide future cash flows, so acquiring and retaining customers is important. The document then outlines 11 strategies for increasing a customer's lifetime value, such as increasing purchase frequency, sales amounts, customer retention, and developing new products/services that appeal to existing customers.
Implementing Customer Loyalty Program PowerPoint Presentation SlidesSlideTeam
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Presenting this set of slides with name - Implementing Customer Loyalty Program Powerpoint Presentation Slides. Enhance your audiences knowledge with this well researched complete deck. Showcase all the important features of the deck with perfect visuals. This deck comprises of total of twenty four slides with each slide explained in detail. Each template comprises of professional diagrams and layouts. Our professional PowerPoint experts have also included icons, graphs and charts for your convenience. All you have to do is DOWNLOAD the deck. Make changes as per the requirement. Yes, these PPT slides are completely customizable. Edit the colour, text and font size. Add or delete the content from the slide. And leave your audience awestruck with the professionally designed Implementing Customer Loyalty Program Powerpoint Presentation Slides complete deck.
Churn is Dead, Long Live Net Dollar Retention, SaaStr Annual @ Home, SaaStr 2020Dave Kellogg
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My presentation at SaaStr Annual 2020 which focuses on understanding SaaS business from a metrics viewpoint with a particular focus on the health of the installed base as measured by churn rates and net dollar retention rates
Implementing Customer Loyalty Program PowerPoint Presentation SlidesSlideTeam
Â
Presenting this set of slides with name - Implementing Customer Loyalty Program Powerpoint Presentation Slides. Enhance your audiences knowledge with this well researched complete deck. Showcase all the important features of the deck with perfect visuals. This deck comprises of total of twenty four slides with each slide explained in detail. Each template comprises of professional diagrams and layouts. Our professional PowerPoint experts have also included icons, graphs and charts for your convenience. All you have to do is DOWNLOAD the deck. Make changes as per the requirement. Yes, these PPT slides are completely customizable. Edit the colour, text and font size. Add or delete the content from the slide. And leave your audience awestruck with the professionally designed Implementing Customer Loyalty Program Powerpoint Presentation Slides complete deck.
Churn is Dead, Long Live Net Dollar Retention, SaaStr Annual @ Home, SaaStr 2020Dave Kellogg
Â
My presentation at SaaStr Annual 2020 which focuses on understanding SaaS business from a metrics viewpoint with a particular focus on the health of the installed base as measured by churn rates and net dollar retention rates
A detailed look at why SaaS business are so different from traditional software companies, and why traditional ways of looking at their finances fail to understand the business. Provides an alternative set of metrics that show the right way to look at a SaaS business.
For more on the SaaS business model and Metrics, see this blog post:
www.forentrepreneurs.com/saas-metrics-2/
This presentation provides insight into how to forecast and calculate customer lifetime value (CLV). Here a startup applied a scientific approach to maximise customer retention and minimise churn. The outputs of the analytics were built into the system and business processes driving the success of the company and helping it to win the customer service of the year award, and to achieve a successful exit through acquisition.
Everything You Need to Know About Customer Lifetime Value (CLV)Demac Media
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Customer Lifetime Value (CLV) has become a must know term for eCommerce merchants of any size. It allows you to discover the true value each customer has to your store. But what most people don't know are the different ways to calculate it and the true impact it has on your business.
In this discussion we cover everything you need to know about customer lifetime value. We present a few ways to calculate it as well as show some cases where CLV can impact a business. These cases will show what happens when you ignore lifetime value, and the benefits of making decisions with CLV in mind.
How to Create a Customer Segmentation ModelMark Haubert
Â
Are your sales and marketing teams focused on the right customers? Learn how to define your Ideal Customer Criteria, create a Customer Segmentation Model, identify your Key Accounts and focus your teams on customers with the greatest potential for growth.
Customer Segmentation for Retention StrategyMelody Ucros
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IE Business School
Marketing Intelligence Project by Group F:
Melody Ucros
Jina Kim
Andrea Blasioli
Adedeji Rodemade
Fergus Buckey
Alex Kyalo
Louis Rampignon
Data Source: http://archive.ics.uci.edu/ml/datasets/online+retail
Customer Relationship Management Model PowerPoint Presentation SlidesSlideTeam
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Getting problem in managing customer retention? We have come up with professionally created customer relationship management model PowerPoint presentation slides. Organizations can participate to manage their relations with customers at all points during the customer lifecycle. Furthermore, in this pre-designed professionally created CRM framework PPT presentation we have included slides on customer initiatives, customer perceived value, emphases on client transaction, traction vs relationship marketing, economic retention, CRM model, lifecycle management, CRM stages and components, E-CRM process, current lead status, lead and deal acquisition, customer retention, CRM capabilities, bar charts and many more. Apart from this, with our relationship development PPT slides, you can also emphasize various other concepts like customer business relationship, sales force planning, consumer management, organizational planning, customer satisfaction, customer services, consumer technical support and business review. The best part is that you can also easily download our customer relationship management model PowerPoint templates. Get all the ingredients to fit exactly with our Customer Relationship Management Model PowerPoint Presentation Slides. It allows you to attempt the jigsaw.
Fundamentals and advanced concepts in customer segmentation. CLV (customer lifetime value) and specific implications in Telecoms. Approaches in operational deployment of customer segmentation.
Loyalty is more than just a program it is becoming a vehicle for brand philosophy. The new breed of successful loyalty programs go beyond perks to build impactful emotional connections with customers. Unparalleled customer loyalty begins and ends with the quality of your relationships with customers.
Customer segmentation is the process of dividing customers into groups based on common characteristics so companies can market to each group effectively and appropriately.
Segmentation allows marketers to better tailor their marketing efforts to various audience subsets. Those efforts can relate to both communications and product development. Specifically, segmentation helps a company:
Create and communicate targeted marketing messages that will resonate with specific groups of customers, but not with others (who will receive messages tailored to their needs and interests, instead).
Select the best communication channel for the segment, which might be email, social media posts, radio advertising, or another approach, depending on the segment.
Identify ways to improve products or new product or service opportunities.
Establish better customer relationships.
Test pricing options.
Focus on the most profitable customers.
Improve customer service.
Upsell and cross-sell other products and services.
RFM Segmentation is the easiest and most frequently used form of database segmentation. It is based on three key metrics: Recency, Frequency and Monetary Value of customer activity. RFM is often used with transactional history in e-commerce, but can also work for Social Media interactions, online gaming or discussion boards. Based on calculated segments a marketer can prepare cross-sell, up-sell, retention and reactivation capampaigns. This deck provides a simple introduction to the RFM Segmentation methodology.
A detailed look at why SaaS business are so different from traditional software companies, and why traditional ways of looking at their finances fail to understand the business. Provides an alternative set of metrics that show the right way to look at a SaaS business.
For more on the SaaS business model and Metrics, see this blog post:
www.forentrepreneurs.com/saas-metrics-2/
This presentation provides insight into how to forecast and calculate customer lifetime value (CLV). Here a startup applied a scientific approach to maximise customer retention and minimise churn. The outputs of the analytics were built into the system and business processes driving the success of the company and helping it to win the customer service of the year award, and to achieve a successful exit through acquisition.
Everything You Need to Know About Customer Lifetime Value (CLV)Demac Media
Â
Customer Lifetime Value (CLV) has become a must know term for eCommerce merchants of any size. It allows you to discover the true value each customer has to your store. But what most people don't know are the different ways to calculate it and the true impact it has on your business.
In this discussion we cover everything you need to know about customer lifetime value. We present a few ways to calculate it as well as show some cases where CLV can impact a business. These cases will show what happens when you ignore lifetime value, and the benefits of making decisions with CLV in mind.
How to Create a Customer Segmentation ModelMark Haubert
Â
Are your sales and marketing teams focused on the right customers? Learn how to define your Ideal Customer Criteria, create a Customer Segmentation Model, identify your Key Accounts and focus your teams on customers with the greatest potential for growth.
Customer Segmentation for Retention StrategyMelody Ucros
Â
IE Business School
Marketing Intelligence Project by Group F:
Melody Ucros
Jina Kim
Andrea Blasioli
Adedeji Rodemade
Fergus Buckey
Alex Kyalo
Louis Rampignon
Data Source: http://archive.ics.uci.edu/ml/datasets/online+retail
Customer Relationship Management Model PowerPoint Presentation SlidesSlideTeam
Â
Getting problem in managing customer retention? We have come up with professionally created customer relationship management model PowerPoint presentation slides. Organizations can participate to manage their relations with customers at all points during the customer lifecycle. Furthermore, in this pre-designed professionally created CRM framework PPT presentation we have included slides on customer initiatives, customer perceived value, emphases on client transaction, traction vs relationship marketing, economic retention, CRM model, lifecycle management, CRM stages and components, E-CRM process, current lead status, lead and deal acquisition, customer retention, CRM capabilities, bar charts and many more. Apart from this, with our relationship development PPT slides, you can also emphasize various other concepts like customer business relationship, sales force planning, consumer management, organizational planning, customer satisfaction, customer services, consumer technical support and business review. The best part is that you can also easily download our customer relationship management model PowerPoint templates. Get all the ingredients to fit exactly with our Customer Relationship Management Model PowerPoint Presentation Slides. It allows you to attempt the jigsaw.
Fundamentals and advanced concepts in customer segmentation. CLV (customer lifetime value) and specific implications in Telecoms. Approaches in operational deployment of customer segmentation.
Loyalty is more than just a program it is becoming a vehicle for brand philosophy. The new breed of successful loyalty programs go beyond perks to build impactful emotional connections with customers. Unparalleled customer loyalty begins and ends with the quality of your relationships with customers.
Customer segmentation is the process of dividing customers into groups based on common characteristics so companies can market to each group effectively and appropriately.
Segmentation allows marketers to better tailor their marketing efforts to various audience subsets. Those efforts can relate to both communications and product development. Specifically, segmentation helps a company:
Create and communicate targeted marketing messages that will resonate with specific groups of customers, but not with others (who will receive messages tailored to their needs and interests, instead).
Select the best communication channel for the segment, which might be email, social media posts, radio advertising, or another approach, depending on the segment.
Identify ways to improve products or new product or service opportunities.
Establish better customer relationships.
Test pricing options.
Focus on the most profitable customers.
Improve customer service.
Upsell and cross-sell other products and services.
RFM Segmentation is the easiest and most frequently used form of database segmentation. It is based on three key metrics: Recency, Frequency and Monetary Value of customer activity. RFM is often used with transactional history in e-commerce, but can also work for Social Media interactions, online gaming or discussion boards. Based on calculated segments a marketer can prepare cross-sell, up-sell, retention and reactivation capampaigns. This deck provides a simple introduction to the RFM Segmentation methodology.
In this revision presentation, we provide an overview of financial efficiency rations - which assess how effectively a business is managing its assets.
What makes a business model viable? How to move it from viable to great? What are the key metrics to analyze business model performance? How and when should you decide to change your business model? How to manage the transition?
Learn how your company can benefit from the Cost to Serve Initiative. Sonum has successfully implemented Cost to Serve Models in several countries using Acorn Systems software.
this presentation will cover the following topics:
Merchandising Companies
Perpetual Inventory System
Periodic Inventory Systems
Transactions Related to Purchase
Transactions Related to Sale
The Flow of Inventory Costs
Accounting and Valuation Considerations in Business TransactionsSkoda Minotti
Â
Determining the value of a privately-held entity is no easy task. More so, when you are buying or selling a business, the entire transaction process can be overwhelming and confusing. There are many financial and non-financial factors to consider in the transaction process. The implications of an improperly executed transaction can not only make a financial impact, but also put you at risk of key compliance matters, whether accounting, tax, or regulatory matters. This presentation will review the key accounting and valuation concepts that are important to consider in merger and acquisition transactions.
Glen Birnbaum, CPA presents to local Peoria IMEC group on the business valuation process. The target audience was to manufacturing clients. Heinold Banwart, Ltd.
Customer Value and What Things are Worth (DIT Product Mgmt)Rich Mironov
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From my Feb 2014 class time in Dublin Institute of Technology's product management certificate program: a module on quantifying customer value (esp B2B) and how to price software/technology solutions. In-class exercises removed.
Putting the SPARK into Virtual Training.pptxCynthia Clay
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This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
Personal Brand Statement:
As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
Attending a job Interview for B1 and B2 Englsih learnersErika906060
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It is a sample of an interview for a business english class for pre-intermediate and intermediate english students with emphasis on the speking ability.
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
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Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
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A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
LA HUG - Video Testimonials with Chynna Morgan - June 2024Lital Barkan
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Have you ever heard that user-generated content or video testimonials can take your brand to the next level? We will explore how you can effectively use video testimonials to leverage and boost your sales, content strategy, and increase your CRM data.🤯
We will dig deeper into:
1. How to capture video testimonials that convert from your audience 🎥
2. How to leverage your testimonials to boost your sales đź’˛
3. How you can capture more CRM data to understand your audience better through video testimonials. đź“Š
Memorandum Of Association Constitution of Company.pptseri bangash
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www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
www.seribangash.com
Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
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Discover the innovative and creative projects that highlight my journey throu...dylandmeas
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Discover the innovative and creative projects that highlight my journey through Full Sail University. Below, you’ll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
Affordable Stationery Printing Services in Jaipur | Navpack n PrintNavpack & Print
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Looking for professional printing services in Jaipur? Navpack n Print offers high-quality and affordable stationery printing for all your business needs. Stand out with custom stationery designs and fast turnaround times. Contact us today for a quote!
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
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Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
2. Learning Objectives
1. Explain how to
calculate the annual
profitability of a
customer
2. Explain why
customers are
assets
2
3. Learning Objectives
3. Explain how to
calculate the lifetime
value of a customer
4. Explain 11 strategies
for increasing the
lifetime value of a
customer
3
5. Customer Profitability Analysis
• Use an activity-based
costing (ABC) system
with the customer as the
cost object
• Accumulate the costs of
serving customers in
activity center cost pools
• Determine the measure
used to assign costs from
the activity center cost
pools to the customers
5
6. Assigning Costs to Customers
• Calculate the activity center
cost driver rate
• Multiply the activity center
cost driver rate by the
activities used by each
customer to determine the
costs from each activity
center assigned to the
customer
• Repeat for all activity center
cost pools
6
7. Calculate the
Customer’s Profitability
• Subtract cost of goods
sold from sales revenue
to determine gross profit
• Subtract all direct selling
and administrative costs,
such as commissions
• Subtract all costs
assigned to the customer
from the activity center
cost pools to determine
the customer’s
profitability
7
8. Compare Profits
and Sales Revenue
• Compare the customer’s
profitability to the
customer’s sales revenue
• Sometimes the
customers who generate
large amounts of sales
revenue may be
unprofitable because of
the demands they place
on the company (Kanthal
(A) Case)
8
9. Example
• Able Manufacturing Company (a fictitious
company) sells three products. The three
products, their selling prices, and their
cost to purchase are as follows:
Price Cost
• Gadget $1,000 $480 (48%)
• Gizmo $1,200 $648 (54%)
• Super gizmo $1,500 $840 (56%) 9
10. Other Information
• The company keeps the gadget and the
gizmo in stock
• The company does not carry super gizmos
in stock
• Sales commissions are 20% of sales
10
11. Activity Cost Pools
• Able Manufacturing Company has
determined that it should divide its cost of
serving its customers into four cost pools:
– Order processing—gadgets and gizmos
– Order processing—super gizmos
– Delivery
– Customer service (before and after the sale)
11
12. Order Processing
for Gadgets and Gizmos
• Order processing costs for gadgets and
gizmos for the year were $500,000
• The company processed 5,000 orders
• The cost to process one order for a gadget or
gizmo is $100 ($500,000 / 5,000 orders)
12
13. Order Processing
for Super Gizmos
• Order processing costs for the super gizmo
were $100,000 for the year
• The company processed 100 orders for super
gizmos
• The cost to process one order for a super
gizmo is $1,000 ($100,000 / 100 orders)
13
14. Delivery
• The company incurred $300,000 in delivery
costs for the year
• The company made 1,500 deliveries during
the year
• The cost per delivery was $200 ($300,000 /
1,500 deliveries)
14
15. Customer Service
• The company incurred $480,000 in customer
service costs during the year
• The company spent 8,000 hours in providing
customer service
• The cost per customer service hour was $60
($480,000 / 8,000 hours)
15
16. Activities for Customer A
• In a typical year, Customer A purchases
– 700 gadgets
– 750 gizmos
– 50 super gizmos
• Number of orders of gadgets and gizmos: 12
• Number of orders for super gizmos: 2
• Number of deliveries: 14 (12 + 2)
• Number of customer service hours: 4
16
17. Sales Revenue and
Gross Profit for Customer A
• Sales revenue $1,675,000
• Less: cost of goods sold (864,000)
• Gross profit $ 811,000
17
18. Profit for Customer A
• Gross profit $811,000
• Less: sales commissions (335,000)
• Less: order processing
– Gadgets and gizmos (1,200)
– Super gizmos (2,000)
• Less: delivery (2,800)
• Less: customer service (240)
• Profit $469,760
18
19. Activities for Customer B
• In a typical year, Customer B purchases
– 600 gadgets
– 700 gizmos
– 200 super gizmos
– Number of orders for gadgets and gizmos: 60
– Number of orders for super gizmos: 30
– Number of deliveries: 90 (60 + 30)
– Number of customer service hours: 145
19
20. Sales Revenue and
Gross Profit for Customer B
• Sales revenue $1,740,000
• Less: cost of goods sold (909,600)
• Gross profit $830,400
20
21. Profit for Customer B
• Gross profit $830,400
• Less: sales commissions (348,000)
• Less: order processing
– Gadgets and gizmos (6,000)
– Super gizmos (30,000)
• Less: delivery (18,000)
• Less: customer service (8,700)
• Profit $419,700
21
22. Comparison of
Customer A and Customer B
A B
• Sales revenue $1,675,000 $1,740,000
• Gross profit 811,000 830,400
• Commissions 335,000 348,000
• SG&A expenses 6,240 62,700
• Profit 469,760 419,700
• Although Customer B generated more sales
revenue and more gross profit, Customer A is
more profitable because the cost to serve
Customer A was less
22
24. Customers Are Assets
• Customers do not
appear on a balance
sheet prepared
according to GAAP
• But customers are the
most important asset
of a business
• A customer should
provide a business
with positive cash
flows for years
24
25. Acquiring Customers
• Focus on making a sale
to acquire a customer
rather than acquiring a
customer to make a sale
• Be willing to earn little, if
any, profit on the initial
sale
• View customer
acquisition costs as an
investment amortized
over the expected life of
the customer relationship 25
26. Use Risk Reversal to
Acquire More Customers
• Provide a reasonably
long warranty period
• Offer to pay shipping
costs both ways for
dissatisfied customers
• Benefits from risk
reversal usually exceed
the costs
26
27. Businesses Lose Customers
• Yet, businesses
typically lose about 10
to 30 percent of their
customers every year
(The Loyalty Effect,
p. 4)
• When a business
loses a profitable
customer, it loses a
valuable asset
27
28. What a Business Loses
When It Loses a Customer
• Cash flows from the
customer’s business
• Referrals to other
customers
• Insight from the
customer about how
the business can
improve its products
and services
28
29. Customer Retention Correlated
with Productivity and Profits
• Higher customer
retention rates are
correlated with
– higher productivity
– higher profits
(The Loyalty Effect,
pp. 12-13)
• A customer retention
program should be an
integral part of a
company’s business
strategy
29
31. Lifetime Value of a Customer
• Present value of all future
cash flows expected to
be received because of
the customer relationship
• Must include
– Acquisition cost
– Retention cost
– Retention rate
– Margin (sales revenue
minus expenses) each
year (can change)
31
32. Lifetime Value of a Customer
Should include future
cash flows received from
other customers the
company would not have
acquired without the
referrals from the
customer
32
33. Lifetime Value of a Customer
• Sum of all net future cash
flows for each year of
estimated life of the
customer relationship
multiplied by the
estimated retention rate
• Discounted to present
value
• Less: acquisition cost
33
34. Lifetime Value of a Customer
• If the retention rate is
constant, then LVC =
Margin x (retention rate /
1 + discount rate –
retention rate)
• Lifetime value is
approximately equal to 1
to 4.5 times annual
margin (Managing
Customers as
Investments)
34
36. 11 Strategies for Increasing the
Lifetime Value of a Customer
1. Increase the
frequency of
purchase
2. Increase the sales
amount per purchase
3. Increase the retention
rate
36
37. 11 Strategies for Increasing the
Lifetime Value of a Customer
4. Add more products
or services to the
product or service
line and promote
them to current
customers
5. Implement an active
referral and leads
program
6. Implement an online
affiliate program
37
38. 11 Strategies for Increasing the
Lifetime Value of a Customer
7. Avoid making
customers unhappy,
especially over relatively
small things
8. Show appreciation to
profitable customers
9. Provide additional items
to the customer that
provide value to the
customer but that cost
the company little or
nothing
38
39. 11 Strategies for Increasing the
Lifetime Value of a Customer
10. Convert unprofitable
customers into
profitable customers
11. Use activity-based
management (ABM)
to reduce non-value-
added costs of
serving the customer
39
40. 1. Increase the
Frequency of Purchase
• Create and maintain a
customer database
• Sell products and
services a customer
will need to buy often
• Use customer
rewards programs
• Give bounceback
coupons
40
41. Increase Frequency of Purchase
by Regular Communications
• Communicate
regularly with
customers
– Email
– Newsletters
– Catalogs
– Coupons
• Do not communicate
too often so as not to
be annoying
41
42. 2. Increase the Sales
Amount Per Purchase
• Use suggestive
selling “Do you want
fries with that?”
• Better “Do you want
onion rings or fries
with that?”
– Alternate of choice
close
– Mention the more
profitable of the two
last
42
43. 2. Increase the Sales
Amount Per Purchase
• Accept credit cards
and PayPal
• Sell on credit
43
44. 3. Increase the Retention Rate
A 5% increase in
customer retention
rates will yield
between a 25% to
100% increase in
profits across a wide
range of industries.
(The Loyalty Effect,
pp. 13, 33)
44
45. Increase Retention by
Excellent Customer Service
• Do not hire or retain
employees who think
they work for the
“sales prevention”
department
• Train customer
service
representatives to be
positive and helpful
45
46. Increase Retention by
Regular Communications
• Communicate
regularly with
customers
– Email
– Newsletters
– Catalogs
• But not too often
• Ask customers what
they want
46
47. 4. Add More Products or Services
• The easiest customers to
whom a company can sell
its products are its
existing customers
• As a company adds more
products and services to
its product line, its
customers can increase
how much they purchase
from the company and
thereby increase their
lifetime value
47
48. Customers: Existing vs. New
According to Chet
Holmes, the cost of
acquiring a new
customer is six times
greater than selling an
additional product or
service to an existing
customer. (The Ultimate
Sales Machine, p. 209)
48
49. 5. Implement an Active
Referral and Leads Program
• Referral – when a
customer refers a
potential customer to
the business
• Lead – when a
customers refers the
business to a
potential customer
• Referrals are usually
better than leads
49
50. Referrals: Intentions vs. Results
• When asked, a
number of customers
may say that they are
willing to refer the
business to other
customers
• But many of them do
not actually follow
through and make a
referral
50
51. Actively Encourage More Referrals
• Ask customers to refer the
business to other potential
customers
• Give customers
something tangible to give
to the potential customer
such as
– Magnets
– Pens
– Business cards
• Include the company’s
Web site
51
52. Increase the Referrals
and Leads Rate
• Track referrals and
leads
• Calculate the referrals
and leads rate
• Reward customers
who provide referrals
and leads
52
53. Increase the Conversion Rate
of Referrals and Leads
• The company must
make a strong effort
to convert the
potential customer to
a customer
• Be patient and do not
alienate the customer
who made the referral
or lead
53
54. Referred Customers
• Calculate the profitability
of referred customers for
the first year
• Calculate the lifetime
value of referred
customers
• Assess the referrals
program and make
changes to increase the
lifetime value of referred
customers
54
55. 6. Implement an
Online Affiliate Program
• Sell products and/or
services online
• Purchase software that
will run an affiliate
program and pay
commissions to affiliates
• Affiliates place
advertisements or
otherwise refer people
to the company’s Web
site with a code
55
56. Customers Become Affiliates
• Customers can become
affiliates
• A customer can earn a
commission when the
customer refers someone
who makes a purchase
from the company
• The company’s sales
increase and the
customer/affiliate’s lifetime
value increases
56
57. 7. Avoid Making Customers
Unhappy, Especially Over Small
Items
• The customer may not
always be right but be
very careful not to anger
customers unnecessarily
• Unhappy customers may
not come back for a long
time, if ever
• Is it worth losing
potentially large future
sales over a small
problem?
57
58. Unhappy Customers Inform Others
• Unhappy customers can
tell their friends and
associates bad things
about the business
• Unhappy customers can
inform a large number of
potential customers
about the perceived bad
treatment using online
social media and bulletin
boards
58
59. 8. Provide Additional Low Cost or
No Cost Items to the Customer
• Customers appreciate
additional valuable
products that a
company gives them
• Receiving free gifts
helps the customer
relationship
• For example, a
company may be able
to obtain private label
rights (PLR) to e-books,
articles, and reports
and allow customers to
download them free of
charge
59
60. 9. Convert Unprofitable Customers
into Profitable Customers
• Increase the minimum
order size
• Make the ordering
process more efficient
• Convert in-person
and telephone orders
to online orders
60
61. Regular Orders Can
Increase Customer Profitability
• Encourage customers
to order regularly
• Consider continuity
programs where an
order is generated
automatically every
month and charged to
a credit card
61
62. An Unprofitable Customer
Can Be a Loss Leader
• An unprofitable
customer can be a
loss leader if the
unprofitable customer
refers profitable
customers to the
business
• Fire unprofitable
customers only as a
last resort
62
63. 10. Use ABM to Reduce the Cost of
Serving the Customer
• Use activity-based
management (ABM) to
determine the activities used
to serve the customer and
the cost of each activity
• Classify the activities as
value-added activities or
non-value-added activities
• Seek to change the
processes to reduce or
eliminate the non-value-
added activities and thereby
reduce the non-value-added
costs 63
64. Summary
• Use activity-based costing to
calculate the annual
profitability of customers
• View customers as assets
and customer acquisition
costs as an investment
• Implement programs to retain
customers
• Use the 11 strategies to
increase the lifetime value of
a customer
64
65. Conclusion
• Customers are assets
• When the value of assets
increase and liabilities
remain constant, then the
value of stockholders’
equity necessarily
increases
• Therefore, increasing the
lifetime value of every
customer leads to greater
shareholder value
65
67. Books
1. Raving Fans: A Revolutionary Approach
to Customer Service by Kenneth
Blanchard and Sheldon M. Bowles. New
York: William Morrow and Company,
1993.
2. Return on Customer: Creating Maximum
Value from Your Scarcest Resource by
Don Peppers and Martha Rogers, New
York: Currency Doubleday, 2005.
67
68. Books
3. Managing Customers as Investments: The
Strategic Value of Customers in the Long Run
by Sunil Gupta and Donald R. Lehmann,
Upper Saddle River, NJ: Wharton School
Publishing, 2005.
4. Managing Customers for Profit: Strategies to
Increase Profits and Build Loyalty by V.
Kumar, Upper Saddle River, NJ: Wharton
School Publishing, 2008.
68
69. Books
5. The Loyalty Effect: The Hidden Force
Behind Growth, Profits, and Lasting
Value by Frederick F. Reichheld, Boston:
Harvard Business School Press, 1996.
6. The Ultimate Sales Machine:
Turbocharge Your Business with
Relentless Focus on 12 Key Strategies
by Chet Holmes, New York: Portfolio,
2007.
69
70. Books
7. How to Win Customers and Keep Them
for Life by Michael LeBoueuf, New York:
Berkley Books, 1987.
8. Customers for Life: How to Turn That
Onetime Buyer into a Lifetime Customer
by Carl Sewell and Paul B. Brown, New
York: Pocket Books, 1998.
70
71. Articles
1. “Generational Revenue Analysis,” by
Alan D. Campbell, The CPA Journal,
February 2001.
2. “Managing Customer Profitability,” by
Marc J. Epstein, Michael Friedl, and
Kristi Yuthas, Journal of Accountancy,
December 2008.
71
72. Articles
3. “Getting the Most Out of All Your
Customers,” by Jacquelyn S. Thomas,
Werner Reinartz, and V. Kumar, Harvard
Business Review, July 1, 2004.
4. “Managing Customers for Profits (Not
Just Sales),” by Benson P. Shapiro, V.
Kasturi Rangan, Rowland T. Moriarity,
Jr., and Elliott B. Ross, Harvard
Business Review, September 1, 1987.
72
73. Articles
5. “The Right Way to Manage Unprofitable
Customers,” by Vikas Mittal, Matthew
Sarkees, and Feisal Murshed, Harvard
Business Review, April 1, 2008.
6. “Realize Your Customers’ Full Profit
Potential,” by Alan W.H. Grant and
Leonard A. Schlesinger, Harvard
Business Review, September 1, 1995.
73
74. Cases
1. Kanthal (A) by Robert S. Kaplan, Harvard
Business Publishing, 1989.
2. Kanthal (B) by Robert S. Kaplan, Harvard
Business Publishing, 1989.
3. Dakota Office Products by Robert S. Kaplan,
Harvard Business Publishing, 2001.
4. Great Dakota Bank: Online Banking, by
Frances X. Frei, Youngme Moon, and Hanna
Rodriguez Farrar, Harvard Business
Publishing, 2002.
74
75. Web Site Tool
The following Web site from the Harvard
Business School has a calculator for
estimating customer lifetime value:
http://hbsp.harvard.edu/multimedia/flashtools/c
75