[ppt]no slide title - database marketing institute · web viewtitle no slide title author landor...

Arthur Middleton Hughes
VP / Solutions Architect

Customer Retention: how to measure it, build it and keep it.

San Francisco DMA

March 16, 2006

3:00 5:00

Marketing

Database

Analytic &

Campaign

Software

Customer Transactions

Marketing Staff -Access By Web

Inputs from retail, phone, web

How a Modern Database Works

Appended

Data

Modeling &

Analytics

Marketing Campaigns

Data Cleaning

Standardization

Website

Why retention is important: long term loyal customers

Buy more per yearBuy higher priced optionsBuy more oftenAre less price sensitiveAre less costly to serveAre more loyalHave a higher lifetime value

How to retain them

Recruit the right customers to begin withOnce you have them, segment them by lifetime valueCommunicate with them to build loyalty

What proves that communications work?

Manufacturer of indoor lighting productsCatalog sent to 45,000 contractorsPrevious policy: wait for the ordersTest: pick 1,200 customers, split into test of 600 and control of 600Two person pilot program build relationship with test customers to see the results

Change in the number of orders

Orders

0.82

1.12

Control vs Test Groups

Change in number of orders

Sheet1

82%

112%

Sheet2

Sheet3

Change in the Average Order Size

OrderSize

0.86

1.14

Control vs Test Group

Change in average order size

Sheet1

86%

114%

Sheet2

Sheet3

Total revenue gain: $2.6 million dollars

Revenue

0.7

1.27


Change in total revenue

Sheet1

70%

127%

Sheet2

Sheet3

Communications work!

Building a relationship with customers can be highly profitable

Using a database to recreate the old family grocer is a winning strategy

Relationship marketing is the way to go

But, with millions of customers

Which ones should you spend resources on?If you communicate with everyone, you will not have enough resources to retain the very best.To select the best, you need to compute customer lifetime value

Lifetime
Value

Why we need Lifetime Value Analysis

We need to know the value of our customers, so as to properly target our sales and retention effortsWe need to discriminate among our customers to acquire and retain the best

Lifetime Value Analysis
Goal: Determine...

where to put your retention dollarsthe value of each retention strategywhere to put your acquisition dollarshow much to spend on acquisition

What is lifetime value?

Net present value of the profit to be realized on the average new customer during a given number of years.To compute it, you must be able to track customers from year to year.Main use: To evaluate strategy.

Examples of Profitable Strategies

User Groups

Newsletters

Surveys and Responses

Loyalty Programs

Customer and Technical Services

Membership cards and status levels

Event Driven Communications

Event driven communication:

Dear Mr. Hughes:

I would like to remind you that your wife Helenas birthday is coming up in two weeks on November 5th. We have the perfect gift for her in stock.

As you know, she loves Liz Claiborne clothing. We have an absolutely beautiful new suit in blue, her favorite color, in a fourteen, her size, priced at $232.00.

If you like, I can gift wrap the suit at no extra charge and deliver it to you next week, so that you will have it in plenty of time for her birthday. Or, I can put it aside so you can come in to pick it up. Please call me at (703) 754-4470 to let me know which youd prefer.

Sincerely yours,

Robin Baumgartner

Robin Baumgartner, Store Manager

Ridgeway Fashions Leesburg, VA 22069

Lets look at a retail operation

Before and after a loyalty program

LTV Before New Strategies

11.01

NumberResponseSalesAverage

OffersRateResponsesConversionSalesSaleSales

Currently100,000,0002.00%2,000,00030%600,000$260$156,000,000

Warehouse100,000,0002.10%2,100,00030%630,000$260$163,800,000

Increase100,00030,000$7,800,000

11.02

IncreasedProfitIncreased

SalesRateProfits

Annual Warehouse Benefits$7,800,00030%$2,340,000

Annual Warehouse Costs$3,500,000

Loss from warehouse$1,160,000

11.03

80%


SalesRateProfits

Data Mart Benefits$6,240,00030%$1,872,000

Data Mart Costs$800,000

Gain from Data Mart$1,072,000

11.04

StepsCost

Warehouse Build$6,000,000

Over Three Years$2,000,000

Annual Maintenance$500,000

Customer Communications$1,000,000

Total$3,500,000

11.05

LifetimeLikelihood of Defection

ValueHighMediumLow

HighPriority APriority BPriority C

MediumPriority BPriority BPriority C

LowPriority CPriority CPriority C

11.06

LeadsConv.One TimeConv.Two TimeAnnualTotal

RateBuyersRateBuyersRevenueRevenue

Present500,00030%150,00050%75,000$200$15,000,000

With Customer Management500,00036%180,00060%108,000$240$25,920,000

Cost of Customer Management$4,000,000

Net Increased Return$6,920,000

11.07, 08, 09

Year 1Year 2Year 3

Retention Rate40%45%50%

Customers200,00080,00036,000

Visits Per Year1.41.61.8

Spending Per Visit$50$60$70

Revenue$14,000,000$7,680,000$4,536,000

Cost Percentage50%49%48%

Costs$7,000,000$3,763,200$2,177,280

Acquisition Cost $32$6,400,000

Total Costs$13,400,000$3,763,200$2,177,280

Profit$600,000$3,916,800$2,358,720

Discount Rate11.121.32

NPV Profit$600,000$3,497,143$1,786,909

Cum NPV Profie$600,000$4,097,143$5,884,052

Lifetime Value$3.00$20.49$29.42

Fig 11.07

Year 1Year 2Year 3


Customers200,000100,00060,000

Visits Per Year1.622.4


Revenue$17,600,000$14,000,000$11,520,000


Costs$8,800,000$6,860,000$5,529,600


Database Costs$500,000$250,000$150,000

Loyalty Program$5.00$8.00$10.00

Loyalty Costs$1,600,000$1,600,000$1,440,000

Total Costs$17,300,000$8,710,000$7,119,600

Profit$300,000$5,290,000$4,400,400


NPV Profit$300,000$4,723,214$3,333,636

Cum NPV Profie$300,000$5,023,214$8,356,851


Fig 11.08

Year 1Year 2Year 3

Old LTV$3.00$20.49$29.42

New LTV$1.50$25.12$41.78

Change-$1.50$4.63$12.36

With 200,000 members-$300,000$926,071$2,472,799

Fig 11.09

10.11

ConversationsMessagesResponses

TotalActiveSentOpenedQuestions

Zap Registrant Surveys55167921553

Zap Registrant Non Buyers3002072095010

Buyers Invited to Training43017012300

CSR Survey2195142772368149

Corporate Billing Contract Usage1371414700

10.12

Likelihood of Playing in these events

SaturdayWednesdayTuesdayThursday

Gold LottoGold LottoOz LottoPowerball

Jane Smith95.00%2.00%2.00%1.00%

John Brown23.00%25.00%27.00%25.00%

Pat Johnson65.00%31.00%3.00%1.00%

10.13

Second Year Performance

ConversionOrders PerProfit Per

PercentCustomerCustomer

Team78.60%4.1$282.24

Non Team46.60%1.14$30.15

GC84.50%3.86$212.72

Non GC39.10%0.73$12.13

10.14

10.15

4.100

1.143

-

0.500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

Team

Non Team

Team vs Non Team

Orders per customer

In the Second Year

3.857

0.727

-

0.500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

Goal ClubNon Club

Goal Club vs

Non Club

Orders Per

MBD004223EC.xls

Basic Data

Eurosport buyers January 1999 - June 2001

Life Time Value Study

MultiConv.OrdersSalesGrossGMPromoCost PerPromoPromosTotalContrib.% 2 YrAd

CustomersBuyersPercentOrdersPer. Cust.DollarsPer Cust$AOSMarginPercentCostMailingCountPer CustContrib.Per Cust.ContribRatio

First 3 month Performance

Team30,09312,34341.0%22,2740.740$3,852,825$128.03$172.97$1,584,87941.0%$40,520$0.4983,0472.76$1,544,357$51.3218.2%0.014

Non Team180,45838,34621.0%51,3800.285$3,505,384$19.42$68.22$1,657,12047.0%$225,718$0.47476,9532.64$1,431,404$7.9326.3%0.083

GC50,13222,12744.0%37,6250.751$4,973,628$99.21$132.19$2,110,58542.0%$69,454$0.47146,5172.90$2,041,135$40.7219.1%0.018

Non GC160,41928,56218.0%36,0290.225$2,384,582$14.86$66.19$1,131,41547.0%$196,788$0.47416,4902.60$934,629$5.8348.1%0.106

Avg Cust210,55150,68924.0%73,6540.350$7,358,208$34.95$99.90$3,242,00444.0%$266,240$0.47563,0072.70$2,975,765$14.1321.8%0.046


Team26,48713,56351.2%29,7081.122$4,938,634$186.46$166.24$2,049,66941.5%$71,696$0.47153,8405.81$1,977,972$74.6826.5%0.019

Non Team159,38443,04727.0%64,4750.405$4,550,331$28.55$70.58$2,144,03247.1%$398,174$0.47845,6365.31$1,745,860$10.9536.3%0.112

GC45,21925,35756.1%51,9421.149$6,788,515$150.13$130.69$2,898,16442.7%$125,751$0.47267,3615.91$2,772,416$61.3128.8%0.024

Non GC140,65231,25322.2%42,2410.300$2,700,455$19.20$63.93$1,295,54048.0%$344,119$0.47732,1155.21$951,420$6.7655.8%0.163

Avg Cust185,87156,61030.5%94,1830.507$9,488,969$51.05$100.75$4,193,70244.2%$469,871$0.47999,4765.38$3,723,833$20.0330.9%0.063

First Year Performance

Team19,49613,26368.0%42,6262.186$7,303,357$374.61$171.34$3,030,34841.5%$124,705$0.46274,03014.06$2,905,643$149.0452.8%0.022

Non Team118,83245,05037.9%84,4050.710$6,400,160$53.86$75.83$2,980,69246.6%$709,566$0.461,538,11412.94$2,271,128$19.1163.4%0.142

GC35,33026,14274.0%76,9982.179$10,418,291$294.89$135.31$4,425,29442.5%$229,540$0.46501,68514.20$4,195,757$118.7655.8%0.028

Non GC102,99832,17131.2%50,0330.486$3,285,226$31.90$65.66$1,585,74648.3%$604,732$0.461,310,45912.72$981,014$9.5278.5%0.236

Avg Cust138,32858,31342.2%127,0310.918$13,703,520$99.07$107.88$6,011,04243.9%$834,271$0.461,812,14413.10$5,176,772$37.4257.7%0.078


Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders Per Customer

4.0998169616

1.1429491433

Team vs Non TeamOrders per customerIn the Second Year

Gold Club

3.8572890026

0.7269219353

Gold Club vs Non Club Orders Per Customer in the Second Year

Two year

Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders

Per Cust

Team4.100

Non Team1.143

- 0

Gold Club3.857

Non Club0.727

Sheet3

MBD00421B31.xls

Basic Data






Team30,09312,34341.0%22,2740.740$3,852,825$128.03$172.97$1,584,87941.0%$40,520$0.4983,0472.76$1,544,357$51.3218.2%0.014

Non Team180,45838,34621.0%51,3800.285$3,505,384$19.42$68.22$1,657,12047.0%$225,718$0.47476,9532.64$1,431,404$7.9326.3%0.083

GC50,13222,12744.0%37,6250.751$4,973,628$99.21$132.19$2,110,58542.0%$69,454$0.47146,5172.90$2,041,135$40.7219.1%0.018

Non GC160,41928,56218.0%36,0290.225$2,384,582$14.86$66.19$1,131,41547.0%$196,788$0.47416,4902.60$934,629$5.8348.1%0.106

Avg Cust210,55150,68924.0%73,6540.350$7,358,208$34.95$99.90$3,242,00444.0%$266,240$0.47563,0072.70$2,975,765$14.1321.8%0.046


Team26,48713,56351.2%29,7081.122$4,938,634$186.46$166.24$2,049,66941.5%$71,696$0.47153,8405.81$1,977,972$74.6826.5%0.019

Non Team159,38443,04727.0%64,4750.405$4,550,331$28.55$70.58$2,144,03247.1%$398,174$0.47845,6365.31$1,745,860$10.9536.3%0.112

GC45,21925,35756.1%51,9421.149$6,788,515$150.13$130.69$2,898,16442.7%$125,751$0.47267,3615.91$2,772,416$61.3128.8%0.024

Non GC140,65231,25322.2%42,2410.300$2,700,455$19.20$63.93$1,295,54048.0%$344,119$0.47732,1155.21$951,420$6.7655.8%0.163

Avg Cust185,87156,61030.5%94,1830.507$9,488,969$51.05$100.75$4,193,70244.2%$469,871$0.47999,4765.38$3,723,833$20.0330.9%0.063


Team19,49613,26368.0%42,6262.186$7,303,357$374.61$171.34$3,030,34841.5%$124,705$0.46274,03014.06$2,905,643$149.0452.8%0.022

Non Team118,83245,05037.9%84,4050.710$6,400,160$53.86$75.83$2,980,69246.6%$709,566$0.461,538,11412.94$2,271,128$19.1163.4%0.142

GC35,33026,14274.0%76,9982.179$10,418,291$294.89$135.31$4,425,29442.5%$229,540$0.46501,68514.20$4,195,757$118.7655.8%0.028

Non GC102,99832,17131.2%50,0330.486$3,285,226$31.90$65.66$1,585,74648.3%$604,732$0.461,310,45912.72$981,014$9.5278.5%0.236

Avg Cust138,32858,31342.2%127,0310.918$13,703,520$99.07$107.88$6,011,04243.9%$834,271$0.461,812,14413.10$5,176,772$37.4257.7%0.078


Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders Per Customer

4.0998169616

1.1429491433


Goal Club

3.8572890026

0.7269219353

Goal Club vs Non Club Orders Per Customer in the Second Year

Two year

Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders

Per Cust

Team4.100

Non Team1.143

- 0

Goal Club3.857

Non Club0.727

Sheet3

Discount Rate Basic Formula

Market Rate of Interest...5%Assume Risk (Double rate)...10%Years = n Interest = iFormula: D = (1 + i)nCalculation of rate after 2 years: D = (1 + .10)2 = (1.10)2 = 1.21

New Retention Strategies

Provide all customers with a card or register their credit cardsBirthday ClubCommunicate with themGive them premiums if they shop a lotLets see what could happen

With New Strategies

11.01



Currently100,000,0002.00%2,000,00030%600,000$260$156,000,000

Warehouse100,000,0002.10%2,100,00030%630,000$260$163,800,000

Increase100,00030,000$7,800,000

11.02


SalesRateProfits




11.03

80%


SalesRateProfits




11.04

StepsCost





Total$3,500,000

11.05


ValueHighMediumLow




11.06



Present500,00030%150,00050%75,000$200$15,000,000




11.07, 08, 09

Year 1Year 2Year 3


Customers200,00080,00036,000



Revenue$14,000,000$7,680,000$4,536,000


Costs$7,000,000$3,763,200$2,177,280


Total Costs$13,400,000$3,763,200$2,177,280

Profit$600,000$3,916,800$2,358,720


NPV Profit$600,000$3,497,143$1,786,909

Cum NPV Profie$600,000$4,097,143$5,884,052


Fig 11.07

Year 1Year 2Year 3


Customers200,000100,00060,000



Revenue$17,600,000$14,000,000$11,520,000


Costs$8,800,000$6,860,000$5,529,600


Database Costs$500,000$250,000$150,000


Loyalty Costs$1,600,000$1,600,000$1,440,000

Total Costs$17,300,000$8,710,000$7,119,600

Profit$300,000$5,290,000$4,400,400


NPV Profit$300,000$4,723,214$3,333,636

Cum NPV Profie$300,000$5,023,214$8,356,851


Fig 11.08

Year 1Year 2Year 3

Old LTV$3.00$20.49$29.42

New LTV$1.50$25.12$41.78

Change-$1.50$4.63$12.36

With 200,000 members-$300,000$926,071$2,472,799

Fig 11.09

10.11






CSR Survey2195142772368149


10.12




Jane Smith95.00%2.00%2.00%1.00%

John Brown23.00%25.00%27.00%25.00%

Pat Johnson65.00%31.00%3.00%1.00%

10.13




Team78.60%4.1$282.24

Non Team46.60%1.14$30.15

GC84.50%3.86$212.72

Non GC39.10%0.73$12.13

10.14

10.15

4.100

1.143

-

0.500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

Team

Non Team

Team vs Non Team

Orders per customer

In the Second Year

3.857

0.727

-

0.500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

Goal ClubNon Club

Goal Club vs

Non Club

Orders Per

MBD004223EC.xls

Basic Data






Team30,09312,34341.0%22,2740.740$3,852,825$128.03$172.97$1,584,87941.0%$40,520$0.4983,0472.76$1,544,357$51.3218.2%0.014

Non Team180,45838,34621.0%51,3800.285$3,505,384$19.42$68.22$1,657,12047.0%$225,718$0.47476,9532.64$1,431,404$7.9326.3%0.083

GC50,13222,12744.0%37,6250.751$4,973,628$99.21$132.19$2,110,58542.0%$69,454$0.47146,5172.90$2,041,135$40.7219.1%0.018

Non GC160,41928,56218.0%36,0290.225$2,384,582$14.86$66.19$1,131,41547.0%$196,788$0.47416,4902.60$934,629$5.8348.1%0.106

Avg Cust210,55150,68924.0%73,6540.350$7,358,208$34.95$99.90$3,242,00444.0%$266,240$0.47563,0072.70$2,975,765$14.1321.8%0.046


Team26,48713,56351.2%29,7081.122$4,938,634$186.46$166.24$2,049,66941.5%$71,696$0.47153,8405.81$1,977,972$74.6826.5%0.019

Non Team159,38443,04727.0%64,4750.405$4,550,331$28.55$70.58$2,144,03247.1%$398,174$0.47845,6365.31$1,745,860$10.9536.3%0.112

GC45,21925,35756.1%51,9421.149$6,788,515$150.13$130.69$2,898,16442.7%$125,751$0.47267,3615.91$2,772,416$61.3128.8%0.024

Non GC140,65231,25322.2%42,2410.300$2,700,455$19.20$63.93$1,295,54048.0%$344,119$0.47732,1155.21$951,420$6.7655.8%0.163

Avg Cust185,87156,61030.5%94,1830.507$9,488,969$51.05$100.75$4,193,70244.2%$469,871$0.47999,4765.38$3,723,833$20.0330.9%0.063


Team19,49613,26368.0%42,6262.186$7,303,357$374.61$171.34$3,030,34841.5%$124,705$0.46274,03014.06$2,905,643$149.0452.8%0.022

Non Team118,83245,05037.9%84,4050.710$6,400,160$53.86$75.83$2,980,69246.6%$709,566$0.461,538,11412.94$2,271,128$19.1163.4%0.142

GC35,33026,14274.0%76,9982.179$10,418,291$294.89$135.31$4,425,29442.5%$229,540$0.46501,68514.20$4,195,757$118.7655.8%0.028

Non GC102,99832,17131.2%50,0330.486$3,285,226$31.90$65.66$1,585,74648.3%$604,732$0.461,310,45912.72$981,014$9.5278.5%0.236

Avg Cust138,32858,31342.2%127,0310.918$13,703,520$99.07$107.88$6,011,04243.9%$834,271$0.461,812,14413.10$5,176,772$37.4257.7%0.078


Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders Per Customer

4.0998169616

1.1429491433


Gold Club

3.8572890026

0.7269219353


Two year

Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders

Per Cust

Team4.100

Non Team1.143

- 0

Gold Club3.857

Non Club0.727

Sheet3

MBD00421B31.xls

Basic Data






Team30,09312,34341.0%22,2740.740$3,852,825$128.03$172.97$1,584,87941.0%$40,520$0.4983,0472.76$1,544,357$51.3218.2%0.014

Non Team180,45838,34621.0%51,3800.285$3,505,384$19.42$68.22$1,657,12047.0%$225,718$0.47476,9532.64$1,431,404$7.9326.3%0.083

GC50,13222,12744.0%37,6250.751$4,973,628$99.21$132.19$2,110,58542.0%$69,454$0.47146,5172.90$2,041,135$40.7219.1%0.018

Non GC160,41928,56218.0%36,0290.225$2,384,582$14.86$66.19$1,131,41547.0%$196,788$0.47416,4902.60$934,629$5.8348.1%0.106

Avg Cust210,55150,68924.0%73,6540.350$7,358,208$34.95$99.90$3,242,00444.0%$266,240$0.47563,0072.70$2,975,765$14.1321.8%0.046


Team26,48713,56351.2%29,7081.122$4,938,634$186.46$166.24$2,049,66941.5%$71,696$0.47153,8405.81$1,977,972$74.6826.5%0.019

Non Team159,38443,04727.0%64,4750.405$4,550,331$28.55$70.58$2,144,03247.1%$398,174$0.47845,6365.31$1,745,860$10.9536.3%0.112

GC45,21925,35756.1%51,9421.149$6,788,515$150.13$130.69$2,898,16442.7%$125,751$0.47267,3615.91$2,772,416$61.3128.8%0.024

Non GC140,65231,25322.2%42,2410.300$2,700,455$19.20$63.93$1,295,54048.0%$344,119$0.47732,1155.21$951,420$6.7655.8%0.163

Avg Cust185,87156,61030.5%94,1830.507$9,488,969$51.05$100.75$4,193,70244.2%$469,871$0.47999,4765.38$3,723,833$20.0330.9%0.063


Team19,49613,26368.0%42,6262.186$7,303,357$374.61$171.34$3,030,34841.5%$124,705$0.46274,03014.06$2,905,643$149.0452.8%0.022

Non Team118,83245,05037.9%84,4050.710$6,400,160$53.86$75.83$2,980,69246.6%$709,566$0.461,538,11412.94$2,271,128$19.1163.4%0.142

GC35,33026,14274.0%76,9982.179$10,418,291$294.89$135.31$4,425,29442.5%$229,540$0.46501,68514.20$4,195,757$118.7655.8%0.028

Non GC102,99832,17131.2%50,0330.486$3,285,226$31.90$65.66$1,585,74648.3%$604,732$0.461,310,45912.72$981,014$9.5278.5%0.236

Avg Cust138,32858,31342.2%127,0310.918$13,703,520$99.07$107.88$6,011,04243.9%$834,271$0.461,812,14413.10$5,176,772$37.4257.7%0.078


Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders Per Customer

4.0998169616

1.1429491433


Goal Club

3.8572890026

0.7269219353


Two year

Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders

Per Cust

Team4.100

Non Team1.143

- 0

Goal Club3.857

Non Club0.727

Sheet3

Effect of adoption of new strategies

11.01



Currently100,000,0002.00%2,000,00030%600,000$260$156,000,000

Warehouse100,000,0002.10%2,100,00030%630,000$260$163,800,000

Increase100,00030,000$7,800,000

11.02


SalesRateProfits




11.03

80%


SalesRateProfits




11.04

StepsCost





Total$3,500,000

11.05


ValueHighMediumLow




11.06



Present500,00030%150,00050%75,000$200$15,000,000




11.07, 08, 09

Year 1Year 2Year 3


Customers200,00080,00036,000



Revenue$14,000,000$7,680,000$4,536,000


Costs$7,000,000$3,763,200$2,177,280


Total Costs$13,400,000$3,763,200$2,177,280

Profit$600,000$3,916,800$2,358,720


NPV Profit$600,000$3,497,143$1,786,909

Cum NPV Profie$600,000$4,097,143$5,884,052


Fig 11.07

Year 1Year 2Year 3


Customers200,000100,00060,000



Revenue$17,600,000$14,000,000$11,520,000


Costs$8,800,000$6,860,000$5,529,600


Database Costs$500,000$250,000$150,000


Loyalty Costs$1,600,000$1,600,000$1,440,000

Total Costs$17,300,000$8,710,000$7,119,600

Profit$300,000$5,290,000$4,400,400


NPV Profit$300,000$4,723,214$3,333,636

Cum NPV Profie$300,000$5,023,214$8,356,851


Fig 11.08

Year 1Year 2Year 3

Old LTV$3.00$20.49$29.42

New LTV$1.50$25.12$41.78

Change-$1.50$4.63$12.36

With 200,000 members-$300,000$926,071$2,472,799

Fig 11.09

10.11






CSR Survey2195142772368149


10.12




Jane Smith95.00%2.00%2.00%1.00%

John Brown23.00%25.00%27.00%25.00%

Pat Johnson65.00%31.00%3.00%1.00%

10.13




Team78.60%4.1$282.24

Non Team46.60%1.14$30.15

GC84.50%3.86$212.72

Non GC39.10%0.73$12.13

10.14

10.15

4.100

1.143

-

0.500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

Team

Non Team

Team vs Non Team

Orders per customer

In the Second Year

3.857

0.727

-

0.500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

Goal ClubNon Club

Goal Club vs

Non Club

Orders Per

MBD004223EC.xls

Basic Data






Team30,09312,34341.0%22,2740.740$3,852,825$128.03$172.97$1,584,87941.0%$40,520$0.4983,0472.76$1,544,357$51.3218.2%0.014

Non Team180,45838,34621.0%51,3800.285$3,505,384$19.42$68.22$1,657,12047.0%$225,718$0.47476,9532.64$1,431,404$7.9326.3%0.083

GC50,13222,12744.0%37,6250.751$4,973,628$99.21$132.19$2,110,58542.0%$69,454$0.47146,5172.90$2,041,135$40.7219.1%0.018

Non GC160,41928,56218.0%36,0290.225$2,384,582$14.86$66.19$1,131,41547.0%$196,788$0.47416,4902.60$934,629$5.8348.1%0.106

Avg Cust210,55150,68924.0%73,6540.350$7,358,208$34.95$99.90$3,242,00444.0%$266,240$0.47563,0072.70$2,975,765$14.1321.8%0.046


Team26,48713,56351.2%29,7081.122$4,938,634$186.46$166.24$2,049,66941.5%$71,696$0.47153,8405.81$1,977,972$74.6826.5%0.019

Non Team159,38443,04727.0%64,4750.405$4,550,331$28.55$70.58$2,144,03247.1%$398,174$0.47845,6365.31$1,745,860$10.9536.3%0.112

GC45,21925,35756.1%51,9421.149$6,788,515$150.13$130.69$2,898,16442.7%$125,751$0.47267,3615.91$2,772,416$61.3128.8%0.024

Non GC140,65231,25322.2%42,2410.300$2,700,455$19.20$63.93$1,295,54048.0%$344,119$0.47732,1155.21$951,420$6.7655.8%0.163

Avg Cust185,87156,61030.5%94,1830.507$9,488,969$51.05$100.75$4,193,70244.2%$469,871$0.47999,4765.38$3,723,833$20.0330.9%0.063


Team19,49613,26368.0%42,6262.186$7,303,357$374.61$171.34$3,030,34841.5%$124,705$0.46274,03014.06$2,905,643$149.0452.8%0.022

Non Team118,83245,05037.9%84,4050.710$6,400,160$53.86$75.83$2,980,69246.6%$709,566$0.461,538,11412.94$2,271,128$19.1163.4%0.142

GC35,33026,14274.0%76,9982.179$10,418,291$294.89$135.31$4,425,29442.5%$229,540$0.46501,68514.20$4,195,757$118.7655.8%0.028

Non GC102,99832,17131.2%50,0330.486$3,285,226$31.90$65.66$1,585,74648.3%$604,732$0.461,310,45912.72$981,014$9.5278.5%0.236

Avg Cust138,32858,31342.2%127,0310.918$13,703,520$99.07$107.88$6,011,04243.9%$834,271$0.461,812,14413.10$5,176,772$37.4257.7%0.078


Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders Per Customer

4.0998169616

1.1429491433


Gold Club

3.8572890026

0.7269219353


Two year

Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders

Per Cust

Team4.100

Non Team1.143

- 0

Gold Club3.857

Non Club0.727

Sheet3

MBD00421B31.xls

Basic Data






Team30,09312,34341.0%22,2740.740$3,852,825$128.03$172.97$1,584,87941.0%$40,520$0.4983,0472.76$1,544,357$51.3218.2%0.014

Non Team180,45838,34621.0%51,3800.285$3,505,384$19.42$68.22$1,657,12047.0%$225,718$0.47476,9532.64$1,431,404$7.9326.3%0.083

GC50,13222,12744.0%37,6250.751$4,973,628$99.21$132.19$2,110,58542.0%$69,454$0.47146,5172.90$2,041,135$40.7219.1%0.018

Non GC160,41928,56218.0%36,0290.225$2,384,582$14.86$66.19$1,131,41547.0%$196,788$0.47416,4902.60$934,629$5.8348.1%0.106

Avg Cust210,55150,68924.0%73,6540.350$7,358,208$34.95$99.90$3,242,00444.0%$266,240$0.47563,0072.70$2,975,765$14.1321.8%0.046


Team26,48713,56351.2%29,7081.122$4,938,634$186.46$166.24$2,049,66941.5%$71,696$0.47153,8405.81$1,977,972$74.6826.5%0.019

Non Team159,38443,04727.0%64,4750.405$4,550,331$28.55$70.58$2,144,03247.1%$398,174$0.47845,6365.31$1,745,860$10.9536.3%0.112

GC45,21925,35756.1%51,9421.149$6,788,515$150.13$130.69$2,898,16442.7%$125,751$0.47267,3615.91$2,772,416$61.3128.8%0.024

Non GC140,65231,25322.2%42,2410.300$2,700,455$19.20$63.93$1,295,54048.0%$344,119$0.47732,1155.21$951,420$6.7655.8%0.163

Avg Cust185,87156,61030.5%94,1830.507$9,488,969$51.05$100.75$4,193,70244.2%$469,871$0.47999,4765.38$3,723,833$20.0330.9%0.063


Team19,49613,26368.0%42,6262.186$7,303,357$374.61$171.34$3,030,34841.5%$124,705$0.46274,03014.06$2,905,643$149.0452.8%0.022

Non Team118,83245,05037.9%84,4050.710$6,400,160$53.86$75.83$2,980,69246.6%$709,566$0.461,538,11412.94$2,271,128$19.1163.4%0.142

GC35,33026,14274.0%76,9982.179$10,418,291$294.89$135.31$4,425,29442.5%$229,540$0.46501,68514.20$4,195,757$118.7655.8%0.028

Non GC102,99832,17131.2%50,0330.486$3,285,226$31.90$65.66$1,585,74648.3%$604,732$0.461,310,45912.72$981,014$9.5278.5%0.236

Avg Cust138,32858,31342.2%127,0310.918$13,703,520$99.07$107.88$6,011,04243.9%$834,271$0.461,812,14413.10$5,176,772$37.4257.7%0.078


Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders Per Customer

4.0998169616

1.1429491433


Goal Club

3.8572890026

0.7269219353


Two year

Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders

Per Cust

Team4.100

Non Team1.143

- 0

Goal Club3.857

Non Club0.727

Sheet3

What is the proper computation period?

Which is the correct lifetime value? 1, 2, 3, 4, 5 or more years?They are all correct. Which you use depends on your product or service.Long lifetimes: banks, insurance, utilities.Short lifetimes: discount houses, package goods, catalogers.

Five Ways to Boost LTV with Database Strategies

Increase the retention rateIncrease the referral rate

Increase the spending rateDecrease the direct costsDecrease the marketing costs

How to use lifetime value

Compute a base lifetime valueDream up a new strategy. Estimate the benefits and costsDetermine whether your new lifetime value goes up or goes downDont undertake any new strategy until you can prove it will be successful

Using lifetime value to get budget approval

Database marketing budgets are usually carved from somewhere elseYou have to prove that you will make better use of the funds than the othersLifetime value can supply testable numbers that CFOs can understandBase your budget on solid numbers backed up by valid tests

What your new budget will buy

11.01



Currently100,000,0002.00%2,000,00030%600,000$260$156,000,000

Warehouse100,000,0002.10%2,100,00030%630,000$260$163,800,000

Increase100,00030,000$7,800,000

11.02


SalesRateProfits




11.03

80%


SalesRateProfits




11.04

StepsCost





Total$3,500,000

11.05


ValueHighMediumLow




11.06



Present500,00030%150,00050%75,000$200$15,000,000




11.07, 08, 09

Year 1Year 2Year 3


Customers200,00080,00036,000



Revenue$14,000,000$7,680,000$4,536,000


Costs$7,000,000$3,763,200$2,177,280


Total Costs$13,400,000$3,763,200$2,177,280

Profit$600,000$3,916,800$2,358,720


NPV Profit$600,000$3,497,143$1,786,909

Cum NPV Profie$600,000$4,097,143$5,884,052


Fig 11.07

Year 1Year 2Year 3


Customers200,000100,00060,000



Revenue$17,600,000$14,000,000$11,520,000


Costs$8,800,000$6,860,000$5,529,600


Database Costs$500,000$250,000$150,000


Loyalty Costs$1,600,000$1,600,000$1,440,000

Total Costs$17,300,000$8,710,000$7,119,600

Profit$300,000$5,290,000$4,400,400


NPV Profit$300,000$4,723,214$3,333,636

Cum NPV Profie$300,000$5,023,214$8,356,851


Fig 11.08

Year 1Year 2Year 3

Old LTV$3.00$20.49$29.42

New LTV$1.50$25.12$41.78

Change-$1.50$4.63$12.36

With 200,000 members-$300,000$926,071$2,472,799

Fig 11.09

10.11






CSR Survey2195142772368149


10.12




Jane Smith95.00%2.00%2.00%1.00%

John Brown23.00%25.00%27.00%25.00%

Pat Johnson65.00%31.00%3.00%1.00%

10.13




Team78.60%4.1$282.24

Non Team46.60%1.14$30.15

GC84.50%3.86$212.72

Non GC39.10%0.73$12.13

10.14

10.15

4.100

1.143

-

0.500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

Team

Non Team

Team vs Non Team

Orders per customer

In the Second Year

3.857

0.727

-

0.500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

Goal ClubNon Club

Goal Club vs

Non Club

Orders Per

MBD004223EC.xls

Basic Data






Team30,09312,34341.0%22,2740.740$3,852,825$128.03$172.97$1,584,87941.0%$40,520$0.4983,0472.76$1,544,357$51.3218.2%0.014

Non Team180,45838,34621.0%51,3800.285$3,505,384$19.42$68.22$1,657,12047.0%$225,718$0.47476,9532.64$1,431,404$7.9326.3%0.083

GC50,13222,12744.0%37,6250.751$4,973,628$99.21$132.19$2,110,58542.0%$69,454$0.47146,5172.90$2,041,135$40.7219.1%0.018

Non GC160,41928,56218.0%36,0290.225$2,384,582$14.86$66.19$1,131,41547.0%$196,788$0.47416,4902.60$934,629$5.8348.1%0.106

Avg Cust210,55150,68924.0%73,6540.350$7,358,208$34.95$99.90$3,242,00444.0%$266,240$0.47563,0072.70$2,975,765$14.1321.8%0.046


Team26,48713,56351.2%29,7081.122$4,938,634$186.46$166.24$2,049,66941.5%$71,696$0.47153,8405.81$1,977,972$74.6826.5%0.019

Non Team159,38443,04727.0%64,4750.405$4,550,331$28.55$70.58$2,144,03247.1%$398,174$0.47845,6365.31$1,745,860$10.9536.3%0.112

GC45,21925,35756.1%51,9421.149$6,788,515$150.13$130.69$2,898,16442.7%$125,751$0.47267,3615.91$2,772,416$61.3128.8%0.024

Non GC140,65231,25322.2%42,2410.300$2,700,455$19.20$63.93$1,295,54048.0%$344,119$0.47732,1155.21$951,420$6.7655.8%0.163

Avg Cust185,87156,61030.5%94,1830.507$9,488,969$51.05$100.75$4,193,70244.2%$469,871$0.47999,4765.38$3,723,833$20.0330.9%0.063


Team19,49613,26368.0%42,6262.186$7,303,357$374.61$171.34$3,030,34841.5%$124,705$0.46274,03014.06$2,905,643$149.0452.8%0.022

Non Team118,83245,05037.9%84,4050.710$6,400,160$53.86$75.83$2,980,69246.6%$709,566$0.461,538,11412.94$2,271,128$19.1163.4%0.142

GC35,33026,14274.0%76,9982.179$10,418,291$294.89$135.31$4,425,29442.5%$229,540$0.46501,68514.20$4,195,757$118.7655.8%0.028

Non GC102,99832,17131.2%50,0330.486$3,285,226$31.90$65.66$1,585,74648.3%$604,732$0.461,310,45912.72$981,014$9.5278.5%0.236

Avg Cust138,32858,31342.2%127,0310.918$13,703,520$99.07$107.88$6,011,04243.9%$834,271$0.461,812,14413.10$5,176,772$37.4257.7%0.078


Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders Per Customer

4.0998169616

1.1429491433


Gold Club

3.8572890026

0.7269219353


Two year

Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders

Per Cust

Team4.100

Non Team1.143

- 0

Gold Club3.857

Non Club0.727

Sheet3

MBD00421B31.xls

Basic Data






Team30,09312,34341.0%22,2740.740$3,852,825$128.03$172.97$1,584,87941.0%$40,520$0.4983,0472.76$1,544,357$51.3218.2%0.014

Non Team180,45838,34621.0%51,3800.285$3,505,384$19.42$68.22$1,657,12047.0%$225,718$0.47476,9532.64$1,431,404$7.9326.3%0.083

GC50,13222,12744.0%37,6250.751$4,973,628$99.21$132.19$2,110,58542.0%$69,454$0.47146,5172.90$2,041,135$40.7219.1%0.018

Non GC160,41928,56218.0%36,0290.225$2,384,582$14.86$66.19$1,131,41547.0%$196,788$0.47416,4902.60$934,629$5.8348.1%0.106

Avg Cust210,55150,68924.0%73,6540.350$7,358,208$34.95$99.90$3,242,00444.0%$266,240$0.47563,0072.70$2,975,765$14.1321.8%0.046


Team26,48713,56351.2%29,7081.122$4,938,634$186.46$166.24$2,049,66941.5%$71,696$0.47153,8405.81$1,977,972$74.6826.5%0.019

Non Team159,38443,04727.0%64,4750.405$4,550,331$28.55$70.58$2,144,03247.1%$398,174$0.47845,6365.31$1,745,860$10.9536.3%0.112

GC45,21925,35756.1%51,9421.149$6,788,515$150.13$130.69$2,898,16442.7%$125,751$0.47267,3615.91$2,772,416$61.3128.8%0.024

Non GC140,65231,25322.2%42,2410.300$2,700,455$19.20$63.93$1,295,54048.0%$344,119$0.47732,1155.21$951,420$6.7655.8%0.163

Avg Cust185,87156,61030.5%94,1830.507$9,488,969$51.05$100.75$4,193,70244.2%$469,871$0.47999,4765.38$3,723,833$20.0330.9%0.063


Team19,49613,26368.0%42,6262.186$7,303,357$374.61$171.34$3,030,34841.5%$124,705$0.46274,03014.06$2,905,643$149.0452.8%0.022

Non Team118,83245,05037.9%84,4050.710$6,400,160$53.86$75.83$2,980,69246.6%$709,566$0.461,538,11412.94$2,271,128$19.1163.4%0.142

GC35,33026,14274.0%76,9982.179$10,418,291$294.89$135.31$4,425,29442.5%$229,540$0.46501,68514.20$4,195,757$118.7655.8%0.028

Non GC102,99832,17131.2%50,0330.486$3,285,226$31.90$65.66$1,585,74648.3%$604,732$0.461,310,45912.72$981,014$9.5278.5%0.236

Avg Cust138,32858,31342.2%127,0310.918$13,703,520$99.07$107.88$6,011,04243.9%$834,271$0.461,812,14413.10$5,176,772$37.4257.7%0.078


Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders Per Customer

4.0998169616

1.1429491433


Goal Club

3.8572890026

0.7269219353


Two year

Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders

Per Cust

Team4.100

Non Team1.143

- 0

Goal Club3.857

Non Club0.727

Sheet3

How you got there

11.01



Currently100,000,0002.00%2,000,00030%600,000$260$156,000,000

Warehouse100,000,0002.10%2,100,00030%630,000$260$163,800,000

Increase100,00030,000$7,800,000

11.02


SalesRateProfits




11.03

80%


SalesRateProfits




11.04

StepsCost





Total$3,500,000

11.05


ValueHighMediumLow




11.06



Present500,00030%150,00050%75,000$200$15,000,000




11.07, 08, 09

Year 1Year 2Year 3


Customers200,00080,00036,000



Revenue$14,000,000$7,680,000$4,536,000


Costs$7,000,000$3,763,200$2,177,280


Total Costs$13,400,000$3,763,200$2,177,280

Profit$600,000$3,916,800$2,358,720


NPV Profit$600,000$3,497,143$1,786,909

Cum NPV Profie$600,000$4,097,143$5,884,052


Fig 11.07

Year 1Year 2Year 3


Customers200,000100,00060,000



Revenue$17,600,000$14,000,000$11,520,000


Costs$8,800,000$6,860,000$5,529,600


Database Costs$500,000$250,000$150,000


Loyalty Costs$1,600,000$1,600,000$1,440,000

Total Costs$17,300,000$8,710,000$7,119,600

Profit$300,000$5,290,000$4,400,400


NPV Profit$300,000$4,723,214$3,333,636

Cum NPV Profie$300,000$5,023,214$8,356,851


Fig 11.08

Year 1Year 2Year 3

Old LTV$3.00$20.49$29.42

New LTV$1.50$25.12$41.78

Change-$1.50$4.63$12.36

With 200,000 members-$300,000$926,071$2,472,799

Fig 11.09

10.11






CSR Survey2195142772368149


10.12




Jane Smith95.00%2.00%2.00%1.00%

John Brown23.00%25.00%27.00%25.00%

Pat Johnson65.00%31.00%3.00%1.00%

10.13




Team78.60%4.1$282.24

Non Team46.60%1.14$30.15

GC84.50%3.86$212.72

Non GC39.10%0.73$12.13

10.14

10.15

4.100

1.143

-

0.500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

Team

Non Team

Team vs Non Team

Orders per customer

In the Second Year

3.857

0.727

-

0.500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

Goal ClubNon Club

Goal Club vs

Non Club

Orders Per

MBD004223EC.xls

Basic Data






Team30,09312,34341.0%22,2740.740$3,852,825$128.03$172.97$1,584,87941.0%$40,520$0.4983,0472.76$1,544,357$51.3218.2%0.014

Non Team180,45838,34621.0%51,3800.285$3,505,384$19.42$68.22$1,657,12047.0%$225,718$0.47476,9532.64$1,431,404$7.9326.3%0.083

GC50,13222,12744.0%37,6250.751$4,973,628$99.21$132.19$2,110,58542.0%$69,454$0.47146,5172.90$2,041,135$40.7219.1%0.018

Non GC160,41928,56218.0%36,0290.225$2,384,582$14.86$66.19$1,131,41547.0%$196,788$0.47416,4902.60$934,629$5.8348.1%0.106

Avg Cust210,55150,68924.0%73,6540.350$7,358,208$34.95$99.90$3,242,00444.0%$266,240$0.47563,0072.70$2,975,765$14.1321.8%0.046


Team26,48713,56351.2%29,7081.122$4,938,634$186.46$166.24$2,049,66941.5%$71,696$0.47153,8405.81$1,977,972$74.6826.5%0.019

Non Team159,38443,04727.0%64,4750.405$4,550,331$28.55$70.58$2,144,03247.1%$398,174$0.47845,6365.31$1,745,860$10.9536.3%0.112

GC45,21925,35756.1%51,9421.149$6,788,515$150.13$130.69$2,898,16442.7%$125,751$0.47267,3615.91$2,772,416$61.3128.8%0.024

Non GC140,65231,25322.2%42,2410.300$2,700,455$19.20$63.93$1,295,54048.0%$344,119$0.47732,1155.21$951,420$6.7655.8%0.163

Avg Cust185,87156,61030.5%94,1830.507$9,488,969$51.05$100.75$4,193,70244.2%$469,871$0.47999,4765.38$3,723,833$20.0330.9%0.063


Team19,49613,26368.0%42,6262.186$7,303,357$374.61$171.34$3,030,34841.5%$124,705$0.46274,03014.06$2,905,643$149.0452.8%0.022

Non Team118,83245,05037.9%84,4050.710$6,400,160$53.86$75.83$2,980,69246.6%$709,566$0.461,538,11412.94$2,271,128$19.1163.4%0.142

GC35,33026,14274.0%76,9982.179$10,418,291$294.89$135.31$4,425,29442.5%$229,540$0.46501,68514.20$4,195,757$118.7655.8%0.028

Non GC102,99832,17131.2%50,0330.486$3,285,226$31.90$65.66$1,585,74648.3%$604,732$0.461,310,45912.72$981,014$9.5278.5%0.236

Avg Cust138,32858,31342.2%127,0310.918$13,703,520$99.07$107.88$6,011,04243.9%$834,271$0.461,812,14413.10$5,176,772$37.4257.7%0.078


Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders Per Customer

4.0998169616

1.1429491433


Gold Club

3.8572890026

0.7269219353


Two year

Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders

Per Cust

Team4.100

Non Team1.143

- 0

Gold Club3.857

Non Club0.727

Sheet3

MBD00421B31.xls

Basic Data






Team30,09312,34341.0%22,2740.740$3,852,825$128.03$172.97$1,584,87941.0%$40,520$0.4983,0472.76$1,544,357$51.3218.2%0.014

Non Team180,45838,34621.0%51,3800.285$3,505,384$19.42$68.22$1,657,12047.0%$225,718$0.47476,9532.64$1,431,404$7.9326.3%0.083

GC50,13222,12744.0%37,6250.751$4,973,628$99.21$132.19$2,110,58542.0%$69,454$0.47146,5172.90$2,041,135$40.7219.1%0.018

Non GC160,41928,56218.0%36,0290.225$2,384,582$14.86$66.19$1,131,41547.0%$196,788$0.47416,4902.60$934,629$5.8348.1%0.106

Avg Cust210,55150,68924.0%73,6540.350$7,358,208$34.95$99.90$3,242,00444.0%$266,240$0.47563,0072.70$2,975,765$14.1321.8%0.046


Team26,48713,56351.2%29,7081.122$4,938,634$186.46$166.24$2,049,66941.5%$71,696$0.47153,8405.81$1,977,972$74.6826.5%0.019

Non Team159,38443,04727.0%64,4750.405$4,550,331$28.55$70.58$2,144,03247.1%$398,174$0.47845,6365.31$1,745,860$10.9536.3%0.112

GC45,21925,35756.1%51,9421.149$6,788,515$150.13$130.69$2,898,16442.7%$125,751$0.47267,3615.91$2,772,416$61.3128.8%0.024

Non GC140,65231,25322.2%42,2410.300$2,700,455$19.20$63.93$1,295,54048.0%$344,119$0.47732,1155.21$951,420$6.7655.8%0.163

Avg Cust185,87156,61030.5%94,1830.507$9,488,969$51.05$100.75$4,193,70244.2%$469,871$0.47999,4765.38$3,723,833$20.0330.9%0.063


Team19,49613,26368.0%42,6262.186$7,303,357$374.61$171.34$3,030,34841.5%$124,705$0.46274,03014.06$2,905,643$149.0452.8%0.022

Non Team118,83245,05037.9%84,4050.710$6,400,160$53.86$75.83$2,980,69246.6%$709,566$0.461,538,11412.94$2,271,128$19.1163.4%0.142

GC35,33026,14274.0%76,9982.179$10,418,291$294.89$135.31$4,425,29442.5%$229,540$0.46501,68514.20$4,195,757$118.7655.8%0.028

Non GC102,99832,17131.2%50,0330.486$3,285,226$31.90$65.66$1,585,74648.3%$604,732$0.461,310,45912.72$981,014$9.5278.5%0.236

Avg Cust138,32858,31342.2%127,0310.918$13,703,520$99.07$107.88$6,011,04243.9%$834,271$0.461,812,14413.10$5,176,772$37.4257.7%0.078


Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders Per Customer

4.0998169616

1.1429491433


Goal Club

3.8572890026

0.7269219353


Two year

Team8,1956,43878.6%33,5984.100$5,883,979$718.00$175.13$2,420,04841.1%$107,120$0.46233,79328.53$2,312,926$282.24100.0%0.023

Non Team51,24223,90046.6%58,5671.143$4,644,979$90.65$79.31$2,150,69846.3%$605,678$0.471,299,44525.36$1,545,021$30.15100.0%0.167

GC15,64013,21784.5%60,3283.857$8,374,103$535.43$138.81$3,536,30642.2%$209,430$0.46455,76329.14$3,326,876$212.72100.0%0.032

Non GC43,79717,12139.1%31,8370.727$2,154,855$49.20$67.68$1,034,44148.0%$503,371$0.471,077,47524.60$531,070$12.13100.0%0.299

Avg Cust59,43730,33851.0%92,1651.551$10,528,958$177.14$114.24$4,570,74543.4%$712,797$0.461,533,23825.80$3,857,945$64.91100.0%0.087

Orders

Per Cust

Team4.100

Non Team1.143

- 0

Goal Club3.857

Non Club0.727

Sheet3

Using lifetime value to get budget approval

Database marketing budgets are usually carved from somewhere elseYou have to prove that you will make better use of the funds than the othersLifetime value can supply testable numbers that CFOs can understandBase your budget on solid numbers backed up by valid tests

Who is going to defect?

Besides LTV, you can develop a model that predicts which customers are most likely to leave.Putting that model with LTV you can refocus your entire retention strategyYou create a Risk Revenue Matrix

Focus on A and B: 44% of your customers.

Sheet1

Probability of Leaving Soon

LTVHighMediumLow




Sheet2

Sheet3

Who uses LTV in marketing?*

DMA survey shows 52% of Consumer Only marketers use LTV.25% of B to B use LTV.49% Larger companies ($100 million or more) use LTV. 32% smaller companies use LTV65% plan to use LTV more extensively in 200670% use LTV to decide when to reactivate a lapsed customer.68% determine promotions by LTV

*DMA Survey 2005

Conclusion: you can do this

Create a lifetime value table for your customers.Put LTV into each customer recordUse LTV to determine your marketing strategyUse it to improve retention, cross sales, and profits

Why you need customer segments

Customers are usually very differentCollege students, senior citizens, families with children, empty nestersThe same message to all may not work so well.Solution: create segments, and design a program for each segment.

How one retail store created 9 customer segments.

Segments differ from status levels

Segment Strategy

An ideal segment

Has definable characteristics in terms of behavior and demographics: for example, Retired CouplesIs large enough in terms of potential sales to justify a custom marketing strategy with appropriate rewards and budgetHas members who can be motivated by cost effective rewards to modify their behavior in ways that are profitable for your companyMakes efficient use of available data to support segment definition and marketing effortsCan be measured in performance, with control groupsJustifies an organization devoted to it: can be a single person, or part of a persons time, but there should be someone who owns each segment.

A valid segment strategy involves:

Communications to the segment (direct mail, email, on-location personal attention)Rewards designed to modify behaviorControls to measure the success of the strategyA budget for implementation of the strategySpecific goals and metrics for engagement: for behavior modificationAn organization that accepts responsibility for the segment

Segment action plan:

A roadmap showing what will happen when. Send each policyholder a birthday card and a policy review 45 days before their policy renewal date. A budget for the infrastructure and for the segment marketing plansAn organization chart that shows who is responsible for each segment Specific goals to be achieved with milestones for measurement of success

Using Clusters as segments

How one non profit measured success by cluster- Their best

Their worst in terms of response and contributions

Success from mailing only to the best, and not mailing the worst

$5 Million more in net gross revenue.

Multi-channel users are more loyal

Illustrative numbers from several case studies

Why the web is important to retention

Web customers are more affluentTheir average order size is 12% higher than phone orders. The cost of the web order is 16% lower than phone orders. Typical incentive offered is 5% off on any order over $50.Result: 11% of non web customers shift to the web every year.

Creating a club on the internet

A company selling sporting goods created an internet member club.When DB was built they learned that:Club members bought 11 times more than non club members.In two years, 81% of club members became multi-buyers.The club boosted retention

Club Members Retention

Goal Club

0.805

0.234

Conversion to Multi-Buyers after two years

Sheet1

Goal ClubNon Goal Club

80.5%23.4%

Sheet2

Sheet3

Cataloger Customer Retention

Miles Kimball sent 20,000 emails with three different catalogs, and 20,000 with the three catalogs alone.Those who got the emails bought 18% more than those who got the catalogs alone.

More sales = Higher overall retention levels

Retailer Customer Retention

Video retailer sent email newsletters to 170,000 customers for 6 months.Control group of 14,000 got no emailsRetail sales to test group was 28% more than to those without emails.

More sales = Higher overall retention levels

One Click Ordering

With the web we use cookies to say, Welcome back Susan. We keep her credit card on file if she wants so she can do one click orderingResult, compared to controls, is higher retention and annual revenue from those who have one click ordering available.

Essential to measuring the effectiveness of retention programs

Tests and controls

Why controls are essential

The sales force acquires new customersDatabase marketers create higher retention ratesHow do you prove this?Retention program effectiveness can only be measured using control groups

Every marketing promotion should always be a test

Test those who get the promotion against the performance of those who do not get the promotionIf you are sending birthday cards or a newsletter, select 50,000 who do not get birthday cards or the newsletter.Look at the controls spending rate, and retention rate.If there is no difference, your cards or newsletters are a waste of money.

What to measure

Attrition and retention of both groupsMigration upward and downward Incremental sales per program and per season Frequency of purchases Dollars spent per trip and per seasonNumber of departments shopped Number of items purchased Share of customers wallet

Illustration: Birthday Gift

Get customers to record their birthdays with their emails.On their birthday, send them a birthday Pizza CouponOne fast food restaurant offered a $10 birthday coupon to 215,000 customers. Of the coupons sent out, 86,612 were redeemed ($866,120) producing overall sales of $2,900,000 a sales increase of $2 million.

Live Agent

74% of shopping carts abandoned at checkout.Reason: customers have some question. They are unsure about the product, service, color, delivery, etc.Solution: put a live chat button at checkout time.Have live agents available to answer questions.Result: increased retention and sales

Caller ID

Use Caller ID to bring customers complete purchasing history on the screen before the agent begins talking.Result, she can talk to the customer as if she knew her.Result: Increased retention. Greater opportunity for cross sales.

What should you do to keep your customers?

Select loyal customers to begin with. Reward agents for customer loyalty.Set up a customer communications planCalculate LTV of each customerUse modeling to predict churn and to determine the Next Best ProductCombine LTV and NBP to run a proactive retention programOptimize your inducements

Books by Arthur Hughes

From McGraw Hill. Order at www.dbmarketing.com Contact Arthur: [email protected]

79.67%

24.82%

15.83%

1.52%

-21.83%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

5%

11%

28%

28%

28%

82%

112%

0%

20%

40%

60%

80%

100%

120%

Change in

number of

orders

12

Control vs Test Groups

86%

114%

0%

20%

40%

60%

80%

100%

120%

Change in

average

order size

12


70%

127%

0%

20%

40%

60%

80%

100%

120%

140%

Change in

total

revenue

12


Year 1Year 2Year 3

Retention Rate 40%45%50%

Customers 200,000 80,000 36,000

Visits Per Year 1.41.61.8

Spending Per Visit $50$60$70

Revenue$14,000,000$7,680,000$4,536,000

Cost Percentage 50%49%48%

Costs$7,000,000$3,763,200$2,177,280


Total Costs$13,400,000$3,763,200$2,177,280

Profit$600,000$3,916,800$2,358,720

Discount Rate 11.121.32

NPV Profit$600,000$3,497,143$1,786,909

Cum NPV Profie$600,000$4,097,143$5,884,052

Lifetime Value $3.00$20.49$29.42

Year 1Year 2Year 3


Customers200,000 100,000 60,000



Revenue$17,600,000$14,000,000$11,520,000


Costs$8,800,000$6,860,000$5,529,600


Database Costs$500,000$250,000$150,000


Loyalty Costs$1,600,000$1,600,000$1,440,000

Total Costs$17,300,000$8,710,000$7,119,600

Profit$300,000$5,290,000$4,400,400


NPV Profit$300,000$4,723,214$3,333,636

Cum NPV Profie$300,000$5,023,214$8,356,851


Year 1Year 2Year 3

Old LTV$3.00$20.49$29.42

New LTV$1.50$25.12$41.78

Change-$1.50$4.63$12.36

With 200,000 members-$300,000$926,071$2,472,799

Probability of Leaving Soon

LTV

High

Medium

Low

High

Priority A

Priority B

Priority C

Medium

Priority B

Priority B

Priority C

Low

Priority C

Priority C

Priority C

0%

10%

20%

30%

40%

50%

60%

70%

80%

Retail Only

Catalog Only

Web Only

Retail & Catalog

Retail and Web

Catalog & Web

Catalog, retail, web

Retention Rate Year 2

80.5%

23.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

Goal ClubNon Goal Club

Conversion to Multi-

Buyers after two years

100

118

90

95

100

105

110

115

120

Control

Test

100

128

0

20

40

60

80

100

120

140

Control

Test

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