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Maximizing Customer Lifetime Value

Maximizing Customer Lifetime Value. Customer Profitability. Customer Equity. Lifetime Value. Estimating Lifetime Value. Annual customer revenue: $500 Average number of loyal years: 20 Company profit margin: 10 Customer lifetime value: $1000. What is Customer Relationship Management?.

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Maximizing Customer Lifetime Value

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  1. Maximizing Customer Lifetime Value Customer Profitability Customer Equity Lifetime Value

  2. Estimating Lifetime Value • Annual customer revenue: $500 • Average number of loyal years: 20 • Company profit margin: 10 • Customer lifetime value: $1000

  3. What is Customer Relationship Management? CRM is the process of carefully managing detailed information about individual customers and all customer touchpoints to maximize customer loyalty.

  4. Framework for CRM Identify prospects and customers Differentiate customers by needs and value to company Interact to improve knowledge Customize for each customer

  5. CRM Strategies Reduce the rate of defection Increase longevity Enhance “share of wallet” Terminate low-profit customers Focus more effort on high-profit customers

  6. Customer Retention • Acquisition of customers can cost five times more than retaining current customers. • The average customer loses 10% of its customers each year. • A 5% reduction to the customer defection rate can increase profits by 25% to 85%. • The customer profit rate increases over the life of a retained customer.

  7. Figure 5.5 The Customer Development Process Suspects Prospects Disqualified First-time customers Repeat customers Clients Members Partners Ex-customers

  8. Creating Customer Evangelists

  9. Customer database Database marketing Mailing list Business database Data warehouse Data mining Database Key Concepts

  10. Using the Database To identify prospects To target offers To deepen loyalty To reactivate customers To avoid mistakes

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