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© Dr V.Kumar V. Kumar PROFITABLE CUSTOMER ENGAGEMENT Concepts, Metrics & Strategies.

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Presentation on theme: "© Dr V.Kumar V. Kumar PROFITABLE CUSTOMER ENGAGEMENT Concepts, Metrics & Strategies."— Presentation transcript:

1 © Dr V.Kumar V. Kumar PROFITABLE CUSTOMER ENGAGEMENT Concepts, Metrics & Strategies

2 © Dr V.Kumar Instructor’s Presentation Slides 2 Chapter 2 Metrics for Engaging Customers Chapter 2 Metrics for Engaging Customers

3 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Engaging Customers  Microsoft – ‘Bing It On’ challenge  Apple Inc. – ‘iBooks textbooks’  Procter & Gamble – ‘The Great Try Out’ challenge  Microsoft – ‘Bing It On’ challenge  Apple Inc. – ‘iBooks textbooks’  Procter & Gamble – ‘The Great Try Out’ challenge Some engaged customers purchase the product/service Some engaged customers purchase the product/service Result? 3

4 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Ways of Engaging With a Firm  Purchase of the product/service  Customer referrals  Influence in social media  Feedback/suggestion for improvements in the product/service  Purchase of the product/service  Customer referrals  Influence in social media  Feedback/suggestion for improvements in the product/service Customer Engagement Value (CEV) framework incorporates all of the above Customer Engagement Value (CEV) framework incorporates all of the above 4

5 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Components of the CEV Framework Direct contribution to profits Customer Lifetime Value (CLV) Indirect contribution to profits Customer Referral Value (CRV) / Business Reference Value (BRV) Customer Influence Value (CIV) Customer Knowledge Value (CKV) Customer Brand Value (CBV) Dollar metrics contributing to profits of the firm Attitudinal metric interacting with all the other metrics in the framework 5

6 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Customer Brand Value (CBV) Conceptually, it refers to the total value a customer attaches to a brand through his or her experiences with the brand over time. 6

7 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Examples  An excellent example of creation of a strong brand image.  Harley Davidson enjoys a strong image owed to a strong brand loyalty and brand advocacy by its loyal customers  An excellent example of creation of a strong brand image.  Harley Davidson enjoys a strong image owed to a strong brand loyalty and brand advocacy by its loyal customers 7  Samsung’s recent success is a result of building brand awareness and positive brand image in the minds of current and potential customers.

8 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com CBV in B2C and B2B Setting  Customers’ perceived value of the brand drives major profits for successful companies! 8 B2C  In B2B, its all about relationships and perceived value! B2B

9 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Customer Lifetime Value (CLV) Conceptually, it refers to the net present value of the monetary contribution of the profits associated with a customer’s future purchases. 9

10 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Benefits of using CLV for a firm  Enables a firm to segment their customers based on his or her contribution to the firm. 10  Firms can discern how much they can and should invest in a customer in order to achieve a positive ROI.

11 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Case studies Result:  Increase the ROMI by appropriately allocating resources.  Identify products to sell as bundles  Reallocate the excess resources Result:  Increase the ROMI by appropriately allocating resources.  Identify products to sell as bundles  Reallocate the excess resources 11 B2B Result:  The top 20 percent of customers accounted for 95% of their profits at customer level  A 42% increase in store revenue for the bottom 10 stores in 1 year and a 30% increase in the stock price compared to other B2C firms in this industry. Result:  The top 20 percent of customers accounted for 95% of their profits at customer level  A 42% increase in store revenue for the bottom 10 stores in 1 year and a 30% increase in the stock price compared to other B2C firms in this industry. B2C

12 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Customer Referral Value (CRV)  Conceptually, CRV of a customer is the monetary value associated with the future profits given by each referred prospect, discounted to the present value. 12

13 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Benefits of using CRV for a firm A customer with a high CRV contributes to the profits in multiple ways;  By his or her own transaction with the firm;  By converting prospects into actual customers and thereby the contribution to profit through that transaction;  By savings in customer acquisition cost of the prospect. A customer with a high CRV contributes to the profits in multiple ways;  By his or her own transaction with the firm;  By converting prospects into actual customers and thereby the contribution to profit through that transaction;  By savings in customer acquisition cost of the prospect. 13

14 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Business Reference Value (BRV)  Conceptually, Business Reference Value (BRV) for a client is the monetary value associated with future profits as a result of the extent of a client’s reference influencing the prospects to purchase, discounted to present value. 14

15 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Components of BRV  How much influence, in general, does references have on the prospect’s adoption?  How much influence does a particular client firm’s reference have on the prospect’s adoption?  How profitable is the prospective client post adoption? 15

16 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Customer Influence Value (CIV) Conceptually, Customer Influence Value (CIV) refers to the monetary value of the profits associated with the purchases generated by a customer’s social media influence on other acquired customers and prospects, discounted to present value. 16

17 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Comparing CRV and CIV 17

18 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Customer Knowledge Value (CKV) Conceptually, Customer Knowledge Value (CKV) is the monetary value associated with the profits generated by a customer’s feedback, suggestion or an idea to the firm over a period of time. 18

19 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Examples A social network pitched against Facebook, focused on making the sharing experience very rich by integrating photos, videos, and links was launched in February 2010. 19 Google’s ‘Google Buzz’ A service that was intended to consolidate all mobile apps in one. Apple’s ‘Mobile me’

20 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Uses of the CEV Framework for Firms  A forward-looking approach that enables firms to understand;  the current value of a customer based on his or her purchase behavior,  the impact of this current behavior on future profitability, and  the future contribution of a prospective customer to the profit of the firm.  A tool to maximize their profitability while customers market the product/service on the company’s behalf.  A tool to devise effective marketing strategies and ensure efficient allocation of marketing resources. 20

21 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com Conclusion  The components that make up the CEV framework can be determined by considering; 1.The value of a customer’s own transactions and corresponding CLV, 2.The CRV generated by bringing in new customers via referrals, BRV in a B2B context, 3.The CIV generated by primarily influencing and encouraging existing customers to continue and/or expand usage post acquisition as well as encouraging prospects to buy, 4.The CKV created by providing knowledge and feedback to the firm to enhance the process of innovation, and 5.The CBV created by the perception of the brand in minds of customers that helps in maximizing the CLV of the customer. 21

22 © Dr V.Kumar www.drvkumar.com © Dr V.Kumar www.drvkumar.com End of Chapter – 2 22


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