Transcript Week Ten (3-13 to 3

CRM: WEEK 10 (3/13 – 3/17)
 Last Week Highlights:
Brand Equity vs. Customer Equity
Drivers of Customer Equity
Brand, Value, Relationship Equity
Loyalty: Attitudinal vs. Behavioral
Customer Profitability Metrics
Types
Short term/cross sectional vs. Longitudinal
CONSUMER EQUITY = VALUE EQUITY +
RELATIONSHIP EQUITY + BRAND
EQUITY
CRM: WEEK 10 (3/13 – 3/17)
Monday (3/13) Objectives:
Simple CLV formula:
CLV=m(r/(1+i-r)
Where m=margin or profit from a customer per period
r= retention rate
i=discount rate
Retention rate/Churn-typically in the 6090% range.
Discount rate-related to firm’s cost of capital
CRM: WEEK 10 (3/13 – 3/17)
Assumptions to Simplified LTV/CLV:
Profit margins remain constant over the live
of a customer
Retention rates stay constant over time
Customer lifetime value is estimated over an
infinite horizon.
CRM: WEEK 10 (3/13 – 3/17)
Margin Multiple = r/(1+i-r)
Retention Rate
Discount Rate
10% 12% 14%
60%
1.20 1.15 1.11
70%
1.75 1.67 1.59
80%
2.67 2.50 2.35
90%
4.50 4.09 3.75
16%
1.07
1.52
2.22
3.46
CRM: WEEK 10 (3/13 – 3/17)
“CHURN BABY CHURN”
Churn/Retention Rate=
Number of customers who left the company in a
period/(number of old and newly acquired
customers)
Churn/Retention Rate: rate in wireless
industry ranges from 23.4% to 46%.
CRM: WEEK 10 (3/13 – 3/17)
Wednesday’s Objectives:
Kansai Case Discussion
Recommendations should focus on Initiatives
and metrics that would be used to determine
success.
Friday’s Objectives:
Chapter 12 – Data Mining
CRM: WEEK 10 (3/13 – 3/17)
Friday’s Objectives
Definition of Data Mining/Customer
Analytics:
The process of exploration and analysis, by
automatic or semiautomatic means, of large
quantities of data in order to discover meaningful
patterns and rules.
CRM: WEEK 10 (3/13 – 3/17)
Customer Analytics enables the
enterprise to classify, estimate, predict,
cluster, and more accurately describe
data about customers, using
mathematical models and algorithms that
uniquely simplify how it views its
customer base and how it behaves
towards individual customers.