What is the worth of a satisfied customer?

• Facts:
• 65% of new customers are influenced by WOM (Page 8, last but one para)
• 60% of all customers in one year are new(Page 8, last but one para)
• 25% of satisfied customers are repeat customers(Page 8, last but one para)
• Contribution Margin = 60%(Page 8, last but one para)
• Repeat customers generally took 4 additional vacations(Page 8, last but one
para)
• Revenue from 1 customer = $ 1000 (Exhibit 2, Part 1, Sales/Guest , Average
figure)
• In 1986 there were 332000 customers (Exb 2, part 1, 3rd row, last col)
• In 1985 there were 282000 customers (Exb 2, part 1, 3rd row, 6th col).
• Assumptions
• Satisfaction Rate in 1985 = 80%
• All WOM effects in one year take place in the next year. (actually, this
assumption is to avoid the Time Value Effect… you can dump this assumption
if you have the time value data which you would if you have a robust CRM in
real life)
Questions
• What is the Value of a customer of Club Med at 80% Satisfaction
• What is the Value of a customer of Club Med at 90% Satisfaction
• Revenue of 1986 = 337 Million dollars
• Total no. of customers in 1986 = 332000
• Revenue from 1 customer = $ 1000
• New customers in 1986 (60% of TC)=199200
• New customers affected by WOM(65% of NC) =129480
• Total no. of repeat customers (TC-NC)= 132800
• Satisfied customers(SC) = 0.80*282000 = 225600
• Satisfied customers from 1985, who are repeat customers (SCR) =
0.80*0.25*282000 = 56,400
• Customers converted by 1 satisfied customer(WOM/SC)=
129480/225600 = 0.57 (Approx) (Page 8)
• Contribution by 1 repeated customer(on average) =
56400/332000*1000 = 170
• 1 customers on average discusses Club Med with 10 people
• We can see that 1 satisfied customer converts .57 people in 1986
• Contribution by customers converted by satisfied customers =
0.57*1000 = 570
• Value of a customer of Club Med at 80% Satisfaction
• 1000+570+170 = 1740
Value of a customer at 90% Satisfaction
• Customers converted by 1 satisfied customer = 0.9*0.57/0.8 = 0.64
• Contribution by customers converted by satisfied customers =
0.64*1000 = 640
• Contribution by 1 repeated customer(on average) =
56400/332000*1000 = 170
• Value of a customer of Club Med at 90% Satisfaction =
• 1000+640+170 = 1810