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SD Coors. Ten minutes to select the research reports you want to buy. Twenty minutes to complete the pro forma and email a copy to me. Please put your group members’ names on it. Meet back here at 8:20 , ready to discuss the case and make recommendations.

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sd coors
SD Coors
  • Ten minutes to select the research reports you want to buy.
  • Twenty minutes to complete the pro forma and email a copy to me. Please put your group members’ names on it.
  • Meet back here at 8:20, ready to discuss the case and make recommendations.

To purchase research, bring a piece of paper with the requested reports & the total price.

opportunity analysis customers key learning points
Opportunity Analysis/CustomersKey Learning Points
  • A general framework for managing market segments & individual customers.
    • Defining & Segmenting the Product Market
    • Selecting & Targeting Key Segments
      • Acquisition, Retention & Expansion
    • Positioning
  • Quantifying the Value of a Customer (Segment) w/customer-centric metrics
    • CRM, CLV, & Customer Equity
customer relationship management crm retention expansion
Customer Relationship Management (CRM)Retention & Expansion

Segmentation

Selection

Targeting

Acquisition

CRM: Retention & Expansion

Break market into groups (segments) that respond differently to elements of the marketing mix.

Identify segments that will respond most positively (i.e., profitably) to firm’s offerings. Concentrated vs. differentiated targeting strategy.

Determine how to best acquire, retain & expand purchases by the most profitable segments. CRM tracks customers behavior to select, target & retain most profitable customers.

customer relationship management programs customer centric marketing differentiation
Customer Relationship Management ProgramsCustomer-centric Marketing Differentiation

Rewards Programs

Capital One Cards

Frequency/Loyalty Programs

AAdvantage

CRM

Satisfaction, Retention & Relationship Expansion

Community Building

Facebook, Apple

Customization

IBM

Customer Service

Nordstrom

financial analysis in marketing k p chapter 2
Financial Analysis in MarketingK&P Chapter 2
  • Marketing Pro Formas
  • Breakeven Analysis
  • Customer Lifetime Value (CLV)
  • Sales Forecasts
  • Economic Value Analysis
  • Channel Margin Calculus
  • Demand Elasticity

See the Final Exam sample questions.

traditional vs crm metrics
Traditional vs. CRM Metrics

Traditional (Brand) Metrics

Sales – Volume & Revenues

Market Share

Sales Growth

  • CRM Metrics
  • If you don’t have these metrics, you don’t have CRM
  • Primary Customer Metrics
    • Acquisition rate
    • Acquisition cost
    • Retention rate
    • Survival rate
  • Popular Customer Metrics
    • Share of category requirement
    • Size of wallet
    • Share of wallet
  • Strategic Customer Value Metrics
    • Past customer value
    • RFM value
    • Customer lifetime value (CLV)
    • Customer equity
customer lifetime value clv useful analysis at the individual customer segment
Customer Lifetime Value (CLV)Useful Analysis at the Individual Customer & Segment

CLVinfinite lifetime

= CM/(i* + 1 – r) – AC

where

CM = average annual contribution for the customer (segment)

i* = i (=the risk-free discount rate) × risk factor

r = retention rate for the customer (segment)

AC = acquisition costs

― Growth rate

How valuable/profitable is each customer (segment) given prices & variable costs (i.e., contribution), retention rates, discount rate, risk level & acquisition costs?

How valuable/profitable is an acquisition or retention campaign given prices & variable costs (i.e., contribution), retention rates, discount rate, risk level & acquisition costs?

customer lifetime value clv useful analysis at the individual customer segment1
Customer Lifetime Value (CLV)Useful Analysis at the Individual Customer & Segment

CLVinfinite lifetime

= CM/(i* + 1 – r) – AC

where

CM = average annual contribution for the customer (segment)

i* = i (=the risk-free discount rate) × risk factor

r = retention rate for the customer (segment)

AC = acquisition costs

― Growth rate

How valuable/profitable is each customer (segment) given prices & variable costs (i.e., contribution), retention rates, discount rate, risk level & acquisition costs?

How valuable/profitable is an acquisition or retention campaign given prices & variable costs (i.e., contribution), retention rates, discount rate, risk level & acquisition costs?

how much was a facebook customer worth
How much was a Facebook Customer Worth?
  • 2008 Revenues: $300  $350 million
  • 2008 Unique Users: 80,000,000
  • CM (90%) ≈ $3.65  Round to $4.00 for simplicity

CLVinfinite lifetime

= CM/(i* + 1 – r) – AC

If

CM = $4

i* = .06

r = .90

AC = $0

CLVinfinite lifetime

= 4/(.06 + 1 - .9) – 0

4/.16

$25

See Sample Acquisition Value CLV Final Exam Question

customer equity useful analysis at the company level
Customer EquityUseful Analysis at the Company Level

At Facebook

  • 2008 Unique Users: 80,000,000 (and growing)
  • CLV ≈ $25
  • Customer Equity = $2,000,000,000

Customer Equity

= # Customers × CLV

~1.9x multiple

Internal Valuation July 3, 2008: $3.75 B

http://www.marketwatch.com/

Microsoft’s investment (2007) valued company @ $15 B

customer equity facebook update june 2009
Customer EquityFacebook Update June 2009

At Facebook

  • 2009 Unique Users: 250,000,000 (and growing)
  • If CLV ≈ $25
  • Customer Equity = $6,250,000,000

Customer Equity

= # Customers × CLV

~1.6x multiple

External Valuation May 29, 2009: $10.00 B

http://www.techcrunch.com

customer equity facebook update january 2011
Customer EquityFacebook Update January 2011

At Facebook

  • January 2011 Unique Users: 500,000,000 (and growing)
  • Revenue ≈ 1.97 B; CM (90%) ≈ $4
  • CLV ≈ $25
  • Customer Equity = $12.5 B

Customer Equity

= # Customers × CLV

~4x multiple

External Valuation January 2011: $50 B

Goldman

customer equity facebook update january 2012
Customer EquityFacebook Update January 2012

At Facebook

  • January 2012 Unique Users: 800,000,000
  • Revenue ≈ 3.7 B; CM (90%) ≈ $4
  • CLV ≈ $25
  • Customer Equity = $20B

Customer Equity

= # Customers × CLV

~4x multiple

External Valuation January 2012: ~$82 B

customer equity facebook update april 2012
Customer EquityFacebook Update April 2012

At Facebook

  • April 2012 Unique Users: 900,000,000
  • Revenue ≈ 3.7 B; CM (90%) ≈ $4
  • CLV ≈ $25
  • Customer Equity = $22.5B

Customer Equity

= # Customers × CLV

~4.4x multiple

External Valuation May 2012: ~$100 B

customer equity facebook update july 2012
Customer EquityFacebook Update July 2012

At Facebook

  • July 2012 Unique Users: 955,000,000
  • Revenue ≈ 4.7 B; CM (90%) ≈ $4.4
  • CLV ≈ $27.50
  • Customer Equity = $26.3B

Customer Equity

= # Customers × CLV

~1.9x multiple

External Valuation August 2012: ~$50B

review questions
Review Questions
  • What are the 3 steps in the general framework of customer relationship management (CRM)?
  • How do you define and segment a product market?
  • Which types of segmentation variables are most frequently used in CRM?
  • What is the formula to calculate infinite customer lifetime value (CLV)? Customer Equity?
  • Assignment for Next Week: Netflix