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The 80:20 Conundrum - Identifying and keeping profitable customers

Session spread. The Concern: Why are we discussing this ?The Facts: Lets have a closer look !The Concept: Serving the true friends

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The 80:20 Conundrum - Identifying and keeping profitable customers

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    1. The 80:20 Conundrum - Identifying and keeping profitable customers

    3. 80:20 Principle “ In any series of elements to be controlled, a selected small fraction in terms of number of elements almost always accounts for a large fraction in terms of effect ” - Italian economist Vilfredo Pareto

    4. Interpreting the 80:20 Rule 20% customers in any market yield 80% of the profits These are the customers that need to be retained by organizations On the other hand, the remaining 80% customers are relatively under-served and therefore represent a huge business opportunity Organizations could therefore build a business strategy around either of these segments, or sometimes Both

    5. Lets have a closer look ! Banking Credit Card companies data mining for the high usage customers and targeting for promotions FMCG/Airlines Loyalty Programs and Memberships Governments Attracting Industries for share of pie Telecom Datamining on usage patterns helps companies create innovative promotions for specific users

    6. Telecom Expansion (Explosion ?) phenomenon: High ARPU circles targeted first FMCG: Cavinkare: Tried to address the other 80% of the market with the small sachet proposition Nirma: Tried to address the product gap existing in the detergent segment Travel and Tourism Low Cost Airlines Budget Hotels

    7. The other side of the coin !

    8. Why are we discussing this ? Competitive scenario in most industries More than 15 years after liberalization - most industries are deregulated Exposure to global business environment Competition is not just domestic but global Acquisition costs on the rise Increasing need to grow penetration and have efficient distribution Huge Pressure on Margins Cut throat competition, Efficient regulation

    9. Customer rules Buying power of customer on the up Open markets Global customers Multiple substitutes Reasons for defection Service encounter failures Response to failed service Pricing Competition Involuntary switching/other factors

    11. Contribution to Overall Profitability

    12. Customer Groupings

    13. Serving the True Friends….with profitability Aim to …. Attain new customers and increase the number of relationships Increase the profitability of those relationships Increase the duration of profitable relationships

    14. Calculating customer lifetime value Calculating a customer’s lifetime value requires: The cost of acquiring the customer Stream of revenues from customer Computations of the recurring costs of delivering service to that customer

    16. ENABLER

    18. Multidimensional role of the CIO

    19. CIO as the ENABLER ! An integral part of the Strategic think tank of the organization Acts as the backbone of operations of organizations Forays into newer areas leverage IT to derive maximum efficiencies Newer Information Systems and Communication Technologies helps organizations reach out to the masses.

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