Questions for HPU

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Questions for HPU

• What is the problem facing HPU?
• What are the alternatives?
• Which do you recommend?
• In the process somewhere, address
• Is HPU consumer oriented?
• What should we do with DB-14?

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Customer Focus and Managing Customer Loyalty
MARKETING ORIENTATION AND PERFORMANCE
Marketing Performance and Profitability
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THE VALUE OF Customer Focus
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Strong Customer Focus
Insert figure 1.2 here
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Customer Satisfaction

• Measuring Customer Satisfaction
• Customer Satisfaction Index (CSI)
• Why is it important?
• Directly correlated to profits
• Leading indicator of operating performance
• Impact of Dissatisfied Customers

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Customer Satisfaction and Retention

• Why is customer retention important?
• Cost of replacing/maintaining customers
• Lifetime value of a customer
• How does a firm retain customers?
• Encouraging complaints

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Measuring Customer Retention
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Customer Lifetime Value

• The present value of all future profits obtained
  from a customer over the life of his or her
  relationship with the firm.
• (p c)r
• CLV (1 i)t
• Where
• p price paid by a consumer
• c direct cost of servicing the customer
• r probability of buying from the firm
• i discount rate or cost of capital
• t time

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Customer lifetime value

• Separate models of future contribution margin
  (p-c) and repeat purchase probability (r) are
  typically used.
• Two models are used for retention
• Gone for good
• Switch back and forth (Markov process)
• In gone for good
• CLV m (r /(1 I r)) , or margin times a
  margin multiple
• If retention rate .9 and discount rate 12, m
  is about 4

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Customer lifetime value

• Switching or gone for good?
• Cell phones, cable or banking
• customers are monogamous
• Consumer goods, airlines, B2B
• Customers do business with several competitors
• Time (t)
• Many suggest 2 3 is the best you can do.
• Research suggests high accuracy out to 5.

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Customer lifetime value

• Relation of CLV to firm value?
• ? CLV across all customers CE
• CE customer equity.
• CE is a good proxy for firm value
• Classifying customers by CLV
• Accuracy varies from 90 to 45
• Implications?
• Alternative is RFM
• Recency, frequency, monetary value

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Customer Acquisition

• Promotions to enhance acquisitions may hurt CE
• For newspaper subscriptions
• For new subscriptions at regular price, 70
  renewed
• Those acquired at a discount price, 35 renewal
• For web-based grocery
• Regular-priced acquisitions, renewal 40
• Discount acquisitions, renewal 25
• 35 acquisition customers with ½ CLV

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Customer Retention

• What is alive?
• For cell phones, magazine subs., its easy.
• In 2004, eBay had 114 million registered
  customers but only 48 million active accounts
• A 1990 study a 5 increase in customer retention
  could increase profitability 25-85.

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Customer Lifetime Value
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Customer Loyalty

• Measuring Customer Loyalty
• Customer Loyalty Index (CLI)

• Why is it important?
• Customer Recommendations

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Customer Relationship Management

• New Customer vs. Win-Back Customer

• Why is CRM important?
• Not all customers are desirable
• Goal of CRM
• Build Customer Loyalty
• Classification of Customers
• High Potentials
• Top Performers
• Non Profits
• Underachievers

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Customer Relationship Management
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Customer Types
Profitable Not Profitable
Loyal Not Loyal
Core Customers Nonprofit Customers
At-Risk Customers Spinners
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Marketing Orientation

• Three Drivers of Marketing Orientation
• Marketing Knowledge
• Marketing Leadership
• Employee Satisfaction

• Three Pillars of Marketing Orientation
• Customer Focus
• Competitor Orientation
• Team Approach

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Marketing Orientation and Marketing Knowledge
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Marketing Excellence Survey
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About You

• Name
• Degree (s) Where from?
• Undergrad Major
• Instructor for MKT 5360
• Career Aspirations

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Takeaways/Review

• Customer Focus
• Market Orientation
• Customer Satisfaction
• Customer Retention
• Customer Loyalty
• Key Performance Metrics
• Profit impacts of retention, exit, and
  satisfaction

• Customer Relationship Management (CRM)
• Marketing Knowledge
• Exercises
• Marketing Performance Tools

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Marketing Performance Tools
Customer Satisfaction and Customer Profitability
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Marketing Performance Tools
Customer Retention and Customer Loyalty
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Marketing Performance Tools
Lifetime Value of a Customer