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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?. MARKETING ORIENTATION AND PERFORMANCE. Customer Focus and Managing Customer Loyalty.

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questions for hpu
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?
strong customer focus
Strong Customer Focus

Insert figure 1.2 here

customer satisfaction
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
customer satisfaction and retention
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
customer lifetime value
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
customer lifetime value1
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
customer lifetime value2
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.
customer lifetime value3
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
customer acquisition
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
customer retention
Customer Retention
  • What is ‘alive’?
  • For cell phones, magazine subs., it’s 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%.
customer loyalty
Customer Loyalty
  • Measuring Customer Loyalty
    • Customer Loyalty Index (CLI)
  • Why is it important?
    • Customer Recommendations
customer relationship management
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

Customer Relationship Management
  • New Customer vs. Win-Back Customer
customer types
Customer Types

Profitable Not Profitable

Loyal

Not

Loyal

Core Customers Nonprofit Customers

At-Risk Customers Spinners

marketing orientation
Marketing Orientation
  • Three Drivers of Marketing Orientation:
  • Marketing Knowledge
  • Marketing Leadership
  • Employee Satisfaction
  • Three Pillars of Marketing Orientation:
  • Customer Focus
  • Competitor Orientation
  • Team Approach
about you
About You
  • Name
  • Degree (s) Where from?
  • Undergrad Major
  • Instructor for MKT 5360
  • Career Aspirations
takeaways review
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
marketing performance tools
Marketing Performance Tools

Customer Satisfaction and Customer Profitability

marketing performance tools1
Marketing Performance Tools

Customer Retention and Customer Loyalty

marketing performance tools2
Marketing Performance Tools

Lifetime Value of a Customer