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

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Questions for HPU

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  1. 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?

  2. MARKETING ORIENTATION AND PERFORMANCE Customer Focus and Managing Customer Loyalty Marketing Performance and Profitability

  3. THE VALUE OF Customer Focus

  4. Strong Customer Focus Insert figure 1.2 here

  5. 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

  6. 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

  7. Measuring Customer Retention

  8. 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

  9. 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

  10. 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.

  11. 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

  12. 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

  13. 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%.

  14. Customer Lifetime Value

  15. Customer Loyalty • Measuring Customer Loyalty • Customer Loyalty Index (CLI) • Why is it important? • Customer Recommendations

  16. 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

  17. Customer Relationship Management

  18. Customer Types Profitable Not Profitable Loyal Not Loyal Core Customers Nonprofit Customers At-Risk Customers Spinners

  19. Marketing Orientation • Three Drivers of Marketing Orientation: • Marketing Knowledge • Marketing Leadership • Employee Satisfaction • Three Pillars of Marketing Orientation: • Customer Focus • Competitor Orientation • Team Approach

  20. Marketing Orientation and Marketing Knowledge

  21. Marketing Excellence Survey

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

  23. 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

  24. Marketing Performance Tools Customer Satisfaction and Customer Profitability

  25. Marketing Performance Tools Customer Retention and Customer Loyalty

  26. Marketing Performance Tools Lifetime Value of a Customer

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