Concepts, Metrics & Strategies PROFITABLE  CUSTOMER ENGAGEMENT Concepts, Metrics & Strategies V. Kumar

Metrics for Engaging Customers Chapter 2 Metrics for Engaging Customers Instructor’s Presentation Slides

Engaging Customers Microsoft – ‘Bing It On’ challenge Apple Inc. – ‘iBooks textbooks’ Procter & Gamble – ‘The Great Try Out’ challenge Discuss the above mentioned examples to emphasis on how companies engage their customers today to Bring out value this engagement for themselves and the customer. Result? Some engaged customers purchase the product/service

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) framework incorporates all of the above

Components of the CEV Framework Attitudinal metric interacting with all the other metrics in the framework Dollar metrics contributing to profits of the firm 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) The actual framework is shown in the book. Use this slide to explain the actual framework step by step.

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 B2C B2B Customers’ perceived value of the brand drives major profits for successful companies! In B2B, its all about relationships and perceived value!

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 B2C B2B Result: Result: 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. Result: Increase the ROMI by appropriately allocating resources. Identify products to sell as bundles Reallocate the excess resources

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.

Google’s ‘Google Buzz’ Examples Google’s ‘Google Buzz’ Apple’s ‘Mobile me’ 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. A service that was intended to consolidate all mobile apps in one.

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; The value of a customer’s own transactions and corresponding CLV, The CRV generated by bringing in new customers via referrals, BRV in a B2B context, 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, The CKV created by providing knowledge and feedback to the firm to enhance the process of innovation, and 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