v. kumar

© Dr V.Kumar© Dr V.Kumar

V. Kumar

PROFITABLE CUSTOMER ENGAGEMENT

Concepts, Metrics & Strategies

2© Dr V.Kumar

Instructor’s Presentation Slides

Chapter 2

Metrics for Engaging Customers

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Engaging Customers

Microsoft – ‘Bing It On’ challenge

Apple Inc. – ‘iBooks textbooks’

Procter & Gamble – ‘The Great Try Out’ challenge

Some engaged customers purchase the product/service

Result?


Ways of Engaging With a Firm

Purchase of the product/service

Customer referrals

Influence in social media

Feedback/suggestion for improvements in the product/service

Customer Engagement Value (CEV) frameworkincorporates all of the above


Components of the CEV Framework

Direct contribution

to profits• Customer Lifetime Value (CLV)

Indirect contribution

to profits

• Customer Referral Value (CRV) / Business Reference Value (BRV)

• Customer Influence Value (CIV)

• Customer Knowledge Value (CKV)

Customer Brand Value

(CBV)

Dollar metrics contributing to profits of the

firm

Attitudinal metric interacting with all the other metrics in the framework


Customer Brand Value (CBV)

Conceptually, it refers to the total value a customer attaches to a brand through his or her experiences

with the brand over time.


Examples

An excellent example of creation of a strong brand image.

Harley Davidson enjoys a strong image owed to a strong brand loyalty and brand advocacy by its loyal customers

Samsung’s recent success is a result of building brand awareness and positive brand image in the minds of current and potential customers.


CBV in B2C and B2B Setting

Customers’ perceived value of the brand drives major profits for successful companies!

B2C

In B2B, its all about relationships and perceived value!

B2B


Customer Lifetime Value (CLV)

Conceptually, it refers to the net present value of the monetary contribution of the profits associated

with a customer’s future purchases.


Benefits of using CLV for a firm

Enables a firm to segment their customers based on his or her contribution to the firm.

Firms can discern how much they can and should invest in a customer in order to achieve a positive ROI.


Case studies

Result: Increase the ROMI by

appropriately allocating resources.

Identify products to sell as bundles

Reallocate the excess resources

B2BResult: The top 20 percent of customers

accounted for 95% of their profits at customer level

A 42% increase in store revenue for the bottom 10 stores in 1 year and a 30% increase in the stock price compared to other B2C firms in this industry.

B2C


Customer Referral Value (CRV)

Conceptually, CRV of a customer is the monetary value associated with the future profits given by each referred prospect, discounted to the present value.


Benefits of using CRV for a firm

A customer with a high CRV contributes to the profits in multiple ways; By his or her own transaction with the firm; By converting prospects into actual customers and thereby

the contribution to profit through that transaction; By savings in customer acquisition cost of the prospect.


Business Reference Value (BRV)

Conceptually, Business Reference Value (BRV) for a client is the monetary value associated with future profits as a result of the extent of a client’s reference influencing the prospects to purchase, discounted to present value.


Components of BRV

How much influence, in general, does references have on the prospect’s adoption?

How much influence does a particular client firm’s reference have on the prospect’s adoption?

How profitable is the prospective client post adoption?


Customer Influence Value (CIV)

Conceptually, Customer Influence Value (CIV) refers to the monetary value of the profits associated with

the purchases generated by a customer’s social media influence on other acquired customers and

prospects, discounted to present value.


Comparing CRV and CIV

CRV CIV

CRV measures the value a current customer brings to a firm by referring prospects and converting them into actual customers using traceable official communication channels like email or text message with individually identified codes.

CIV measures the value a current customer brings to a firm by influencing current and prospective customers in a social media setting.

Customers are extrinsically motivated through firm-generated incentive programs

Customers are intrinsically motivated.

Customers are monetarily compensated. These are tangible compensations provided for the referrals.

Customers are not monetarily compensated but are given prizes (intangible or experiential).


Customer Knowledge Value (CKV)

Conceptually, Customer Knowledge Value (CKV) is the monetary value associated with the profits

generated by a customer’s feedback, suggestion or an idea to the firm over a period of time.


Examples

A social network pitched against Facebook, focused on making the sharing experience very rich by integrating photos, videos, and links was launched in February 2010.

Google’s ‘Google Buzz’

A service that was intended to consolidate all mobile apps in one.

Apple’s ‘Mobile me’


Uses of the CEV Framework for Firms

A forward-looking approach that enables firms to understand; the current value of a customer based on his or her

purchase behavior, the impact of this current behavior on future

profitability, and the future contribution of a prospective customer to

the profit of the firm.

A tool to maximize their profitability while customers market the product/service on the company’s behalf.

A tool to devise effective marketing strategies and ensure efficient allocation of marketing resources.


Conclusion

The components that make up the CEV framework can be determined by considering;

1. The value of a customer’s own transactions and corresponding CLV,

2. The CRV generated by bringing in new customers via referrals, BRV in a B2B context,

3. The CIV generated by primarily influencing and encouraging existing customers to continue and/or expand usage post acquisition as well as encouraging prospects to buy,

4. The CKV created by providing knowledge and feedback to the firm to enhance the process of innovation, and

5. The CBV created by the perception of the brand in minds of customers that helps in maximizing the CLV of the customer.


End of Chapter – 2

v. kumar

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