Marketing Management

Group 1 MBC

Maru Batting Center : Customer Lifetime Value

Case Study Analysis
Maru Keitou
❏ A decorated former collegiate Softball player
❏ Has a Phd from Oxford University
❏ Owns Maru Batting Center
❏ Located in the Roppongi district of Minato ward in Tokyo
❏ Has deep knowledge of the game and her customers
❏ Lacks a marketing background
Business Model
❏ Maru Batting Center (MBC) was open only for appointments made at least 24 hours in advance.
❏ Customers booked one or more of the eight batting cages that offered baseball and softball
pitching machines for a specific period of time, typically in half-hour increments.
❏ Maru assigned one or more of her part-time workers-depending on the appointment-to open
and supervise the facility.
❏ This avoided high fixed costs and allowed MBC to avoid hiring full-time employees, which
reduced labor costs by eliminating employee benefits.
Batting Cage Market
Age/ Attrition MBC Avg Retention
Segment Marketing Strategy/cost
Experience Rate revenue hrs/year Rate

Little 6-15 25% ¥6,500 10 Sponsorship/¥1,000 10%

leaguers

Summer Adults 50% ¥3,000 4 Traditional year-end gifts 15%

Sluggers to holiday parties/¥1500

Elite 16-35/Profes 40% ¥7,500 20 Launch Party, Guest 60%

Ballplayers sionals presence, Free batting,
reach elite players using
mailing list/¥12,800

Entertainme Not players NIL ¥4,000 1.5 Daily Yomiuri Website: 35%
nt Seekers things to do/¥50
Things that need to be prioritized and discussed
Measuring customers’
lifetime value
CLTV is the present value of
the future cash flows or the
value of business attributed
to the customer during his or
her entire relationship with
the company.
Reducing Defection
Customer Defection is the
loss of users or the decrease
in purchases by them, with
the following impact on
reducing the Company's
business.
Building Loyalty
Close interaction with Develop loyalty
the customers programmes and benefits
Ensuring first hand contact Adding referral and loyalty
with the users to remove the programs for the long-lasted
communication barriers. customers.
Membership Creating value through
programmes brand communities
Membership programmes Creating an USP and a strong
specially designed for little community presence to ensure
leaguers, to cut the the sense of belonging to the
expenses at parents’ end.
place.
Customer reviews & We hear what you say. Make sure, your
recommendations words reach us.
CASE DILEMMA

Which Segment of the

Customers should MBC Focus
on?

&

How do they devise a marketing

strategy for the same segment at
optimum cost?
 Acquisition Cost (Per Customer)
= Contact Cost Per Person/
Response Rate
Acquisition Cost Analysis

Little Summer Elite Elite Entertainment

Leaguers Sluggers Ballplayers Ballplayers Seekers
(Print Ad) (Party)

Contact Cost ¥1,000 ¥1,500 ¥300 ¥12,500 ¥50

Response Rate 10.0% 15.0% 0.5% 25.0% 2.5%

Acquisition Cost ¥10,000 ¥10,000 ¥60,000 ¥50,000 ¥2,000


Break Even Analysis Without Discounting
Maru can determine the breakeven value
per customer. This will give an idea about
the strategy implementation of Maru and
the viability of the cost plans charged by
Maru.

Year 1 Year 2 Year 3 Year 4

Little Leaguers - ¥5000 - ¥1250 ¥1563 [Break-even]

Summer Sluggers - ¥4000 - ¥1000 ¥500 [Break-even]

Elite Ballplayers (print ad) - ¥30000 - ¥12000 - ¥1200 ¥5,280 [Break-even]

Elite Ballplayers (party) - ¥20000 - ¥2000 ¥8,800 [Break-even]

Entertainment Seekers - ¥500 ¥25 [Break-even]


Break Even Analysis With Discounting
Break Even Analysis does not take into
account the time value of money. The
assumption of the net present value falling
by ¥100 and the discounting is done on an
annual basis.

Customer Lifetime Value Year

Little Leaguers ¥5556 12

Summer Sluggers ¥956 7

Elite Ballplayers (print ad) ¥5916 11

Elite Ballplayers (Party) ¥15916 11

Entertainment Seekers ¥177 4

Selection of Customer Segment

Based on the Customer Lifetime Value, the most

attractive segment to be targeted is the Elite
Ballplayers (Party)
Reasons:
❏ The expected Customer Lifetime Value is the
highest at ¥15,916
❏ This is one of the fastest segment to achieve
breakeven at 3 years
❏ The customer lifespan is expected to be long
11 years
Marketing Plan For Elite Ballplayers (Party)

Maru can adopt the following steps to attract

this segment

❏ Special Benefits to the individuals as VIPs

to give priority bookings and opportunities
❏ Offering fees discounts for subsequent
years
❏ Spending group discounts for batch
registrations
❏ Loyalty programmes for frequent
customers to retain them for a longer
period of time
Analysis of New Chiyoda Ward Proposal

By break-even analysis, Chiyoda Little Leaguers will take a shorter amount of time to
break-even. If Maru sponsors Chiyoda, it will start making a profit in Year 2, as compared to
in Year 3 for the case with Minato. Thus, if cash flow constraints are a concern for Maru,
Maru should favour the Chiyoda sponsorship rather than for Minato.

Years to Customer Lifetime Value (Cut when Years to

break-even NPV annual profit below ¥100) attrition

Minato Little
3 ¥5,556 12
Leaguers

Chiyoda Little
2 ¥4,615 9
Leaguers
ALTERNATIVES

TARGET ELITE BALLPLAYER MERCHANDISE

❏ Celebrity endorser associated ❏ MBC playing cards for kids aged
with sports 8-18
❏ Product placement ❏ Water Bottles & Jersey

FUNDRAISER FITNESS
❏ Host a fundraiser campaign as a ❏ Get into the fitness equipment market
CSR Project to increase goodwill ❏ Install weighing machines in the city to
increase brand awareness
FINAL SOLUTION
Since Elite Ballplayers are the most attractive target, with the
segment having high Customer Lifetime Value as well as short
payback (break-even) period.

The most feasible method to reach these

customers would be using a combination of hosting
a party with a celebrity guest as a brand endorser.

That said, there are many other qualitative factors that Maru
will have to consider when making her decisions which either
cannot be accounted for by our analysis tools or cannot be
quantified given the current limited data. Hence, while the
report has provided Maru with several suggestions, it should
still be treated as a tentative direction to informed decision
making until more data is gathered and further analysis is
completed.
Bonus Promotion Analysis
Cumulative profit =¥500 per
players with 20 battling
hours annually after 2 year
Compared to the elite ball
player promotion strategy
without discount, a print ad
with a 500 yen discount
strategy took 5 years to
break even, one year
longer than a print ad
without a discount
Maru’s brother’s suggestion
However, with a ¥ 500 discount
strategy due to the high retention
rate, the discounted annual profit
level after the break-even point will
be higher for overtime. Thus, the ¥500
discount strategy can
be a viable and
effective strategy for
For the party with the 500 yen
MBC to consider
discount promotion strategy, the
implementing.
break-even point is the same, but
the annual profit level after the
break-even point discount is higher
than that of the party without the
discount strategy.
 THANK YOU

Excel file for Analysis