Transcript CUSTOMER RELATIONSHIP MANAGEMENT

New Segmentation
Methods and CLV
Gerald E. Smith
MK719
DEFINITIONS
• MARKET SEGMENTATION: Customer
oriented -- identifies customer subgroups of
the market as they currently exist.
• PRODUCT DIFFERENTIATION: Product
oriented -- identifies subgroups of
competing products.
RULE OF MARKET
SEGMENTATION
• Maximize homogeneity within market
segments
• Maximize heterogeneity between market
segments
BASES FOR SEGMENTING
MARKETS
CONSUMER:
• Geographic
• Demographic (age, income,
marital, occupation, ethnicity,
etc.
• Psychographic (AIO, lifestyles)
• Behavioral (occasions, user
status, usage rate, loyalty status,
hierarchy of needs)
• Benefits
BUSINESS TO BUSINESS:
• Demographic (industry,
size, location)
• Customer Variables
(technology, user/nonuser,
loyalty status)
• Purchasing(centralized/de
centralized, functional
orientation, contracts vs.
bids vs. lease)
• Situational (urgency, order
size, product application)
PSYCHOGRAPHIC
SEGMENTATION
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Actualizers (taste, finer things)
Fulfilleds (functionability, value, durability)
Believers (established products/brands)
Achievers (visibility to peers)
Strivers (emulation)
Experiencers (experiential consumption)
Makers (basic practical possessions)
Strugglers (urgent basic needs)
BENEFIT SEGMENTATION
Toothpaste Category
Prevents Cavities
Freshens Breath
Provides Medical Benefits
Demographics
Families with children at home
Young and middle aged parents
Moderate income
Moderate to higher education
Moderate to high incomes
Single adults
Young adults, teens
Working incomes
Working or going to school
Moderate incomes
Empty nesters, mature adults
Senior citizens, “Mod Maturity”’s
Fixed income
More educated
Wealth driven
Psychographics (Lifestyles)
Believers, Fulfilleds, driven by
principle
Involvement with school and
community activities
Education is important
Hygiene is important
Achievers, Strivers, Experiencers
driven by status, acceptance
Active social lives, social goals
Active physical activities
Appearance is important
Avoiding halitosis is important
Makers, Believers, Strugglers,
driven by survival, health
Active health interests
Diet, exercise
Regular medical visits
Medical education, lectures, etc.
Usage
Use Occasions: At least 2x daily
Time of Use: Morning/Evening
Related Behaviors: Regular dental
checkups, floss usage
Loyalty: More
Usage Level: Heavy
Attitudes: Primary product
Use Occasions: Incidental
Time of Use: Prior to social
interactions
Related Behaviors: Use with
breath products
Loyalty: Less
Usage Level: Light
Attitudes: Secondary product
Use Occasions: Several times
daily
Time of Use: Morning/Evening,
after meals
Related Behaviors: Regular dental
checkups, doctor visits, floss usage,
special dental products
Loyalty: More, dependent on
doctor direction
Usage Level: Moderate
Attitudes: Supplementary product
Most Important Attributes
Fluoride
Cavity preventing attributes
Taste
Strength of taste
Breath freshening attributes
Medical ingredients
Effects, and side effects
Endorsements
Segmentation Using
Means End Laddering
Source: Perry, Strategic Marketing Management (2001).
Segmenting Using
Means End Laddering
Segmentation Framing
Source: Barron and Hollingshead, “Making Segmentation Work,” Marketing Management (2002).
Segmenting by
Frames of Reference and
Contrasting Reference Value Profiles
$14-$16
per small parcel
$10-$12
per small parcel
Point-to-Point
Shipping
Service
Document
Security
Service
e.g.,
UPS
e.g.,
Federal Express
Source: Smith, “Segmenting B2B Marketing Using Economic Value Analysis,” Marketing Management (2002).
Segmenting by Value Delivery Model and
Composite Channel Customer Value Models
Commercial Volume Driven
Segment
Extra Installers
$36,000
Positive
Incremental
Value
$234,000
Experienced Installers
Opp Cost $19,000
Experienced Installers
$22,000
Product Failure
Opp Cost $21,000
Product FailureReinstall $18,000
Info Accuracy-Lost Sales
$25,000
Delivery Errors-Lost Cust
$20,000
Delivery Errors-Rep Bus
$12,500
Management Time Lost
$12,500
Experienced Installers
$19,000
Product FailureReinstall $21,000
Positive
Incremental
Value
$158,000
Brand Likelihood of
Purchase $42,000
Reference Value
$500,000
Negative
Incremental
Value
$70,000
Brand Tie-In Purchase
$36,000
Brand Tie-In Purchase
$31,000
Brand Awareness
$45,000
Residential High Service
Segment
Net
Economic
Value
$664,000
Brand Likelihood of
Purchase $41,000
Brand Awareness
$41,000
Reference Value
$400,000
Info Accuracy-Lost Sales
$20,000
Delivery Errors-Lost Cust
$16,000
Delivery Errors-Opp Cost
$16,000
Delivery Errors-Rep Bus
$10,000
Out of Stock-Lost Bus
$11,500
Out of Stock-Rep Bus
$12,000
Management Time Lost
$10,000
Carpet Products Probs
$7,000
Out of Stock-Opp Cost
$11,500
Net
Economic
Value
$444,000
Source: Smith, “Segmenting B2B Marketing Using Economic Value Analysis,” Marketing Management (2002).
Negative
Incremental
Value
$114,000
Contrasting Differentiation Value Profiles
Best Brand Retailers
Volume Driven Retailers
Custom Flooring Installers
$340
Differentiation
Value
Reference
Value
Availability of
Complementary Products
$280
Flooring Installer
Availability
$325
Consumer Confidence
Top Tier Brands
$425
Trained Flooring Installers
$185
Brand Awareness
$335
Location Awareness
$275
$2,000
Differentiation
Value
Consumer Confidence
Second Tier Brands
$305
$2,000
Source: Smith, “Segmenting B2B Marketing Using Economic Value Analysis,” Marketing Management (2002).
Reference
Value
Evaluating Segments Using
Economic Value Pools
Economic Value per Kit
$2,500
$1,655
$1,300
$900
$400
$30
Pharmaceutical Drug Discovery
Academic Research Labs
Clinical Services
(paternity,
inheritance,
infidelity)
Courts and Law Enforcement
Agencies
Immigration
Reference Value
Millions of kits of market potential
Source: Nagle and Hogan, The Strategy and Tactics of Pricing (2006).
Evaluating Segments Using
Profit Pools
Source: Gadiesh and Gilbert, Harvard Business Review (1998).
Evaluating Segments Using
Profit Pools
Source: Gadiesh and Gilbert, Harvard Business Review (1998).
Evaluating Segments Using
Profit Pools
Source: Gadiesh and Gilbert, Harvard Business Review (1998).
CALCULATING CUSTOMER
LIFETIME VALUE
1. Customer Acquisition Costs
2. Customer Break-even Analysis
3. Lifetime Value Analysis
CUSTOMER ACQUISITION
COSTS
Prospecting Costs:
Production, Mailing,
Advertising, Lists
AC = _____________________
Response Rate
RETENTION AND SURVIVAL
(t-1)
Survival (t) = Retention Rate
CUSTOMER LIFETIME
VALUE
CUSTOMER LIFETIME
VALUE
Infinite Life
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BREAK-EVEN ANALYSIS
Frequent Buyers
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BREAK-EVEN ANALYSIS
Occasional Buyers
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LIFETIME VALUE ANALYSIS
Frequent Buyers
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LIFETIME VALUE ANALYSIS
Occasional Buyers
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Segmenting Using CLV
• Likely value of each customer
• Buying patterns of each customer
• Optimal marketing strategies
– For different customer segments
– For each customer over time or situation