Strategic

Customer
Management
Two Sides of Customer Value
Customer-Product Profitability Analysis
Customer Lifetime Value (CLV)

 CLV is the present value of all future streams of profits that

an individual customer generates over the life of his or her
business with the firm
 CLV is based on profits, not revenue
 CLV is a measure of a customer’s profitability over the
long term
Framework Linking Marketing Actions to
Customer Lifetime Value and Company Value
Using CLV to Make Decisions

 To establish customer acquisition cost limits

 Provides a way for an organization to segment its
customer base from high-profitability to low-profitability
customers
 A customer lifetime value is not static
 It helps managers make investment decisions
 It provides an estimate of a firm’s value
Profit and Retention Patterns for the
Customers of a Credit Card Company
Calculating CLV for a Credit Card Company
Customer Acquisition

 The process of attracting and gaining new customers for a

product or service

 It is a critical aspect of business growth, as acquiring new

customers helps expand the customer base and increase
revenue
Whale Curve for an Electronics Parts Company
Customer Profit over Time for
an Insurance Company
How Organizations acquire Customers

 Increase market size: Companies routinely expand their product

space or enter new markets to acquire customers
 Increase marketing investment: The companies can acquire
new customers by increasing marketing expenditure
 Increase effectiveness of acquisition programs: Instead of
spending more, an organization can increase the effectiveness of its
acquisition programs by identifying more responsive, high value
customers or by using more effective communication tools to reach
prospects.
How Organizations acquire Customers

 Offer discounts and incentives: Organizations commonly offer

short-term incentives and discounts to entice customers, such as the
coupons and sales at supermarkets and department stores
 Generate positive word of mouth: The most effective way to
acquire new customers is to delight current customers
Customer Retention

 Customer retention is the ability of a company to retain its existing

customers over a specified period.

 It involves building long-term relationships with customers to ensure

repeat business, loyalty, and ongoing satisfaction.
Customer Retention
Acquiring new customers costs

5x more The average company loses

10%
than retaining current customers

Of its customers yearly

Reducing customer defections by 5% can

increase profits from

25% to 85%
Importance of Understanding Customer
Retention for Companies
 Cost-Effectiveness: Acquiring new customers is often more
expensive than retaining existing ones.
 Revenue Stability: Repeat customers contribute significantly to a
company's revenue stream, providing a more stable and predictable
income
 Brand Advocacy: Satisfied, loyal customers are more likely to
become brand advocates, promoting the company through positive
word-of-mouth and referrals
Importance of Understanding Customer
Retention for Companies
 Competitive Advantage: In competitive markets, businesses that can
retain customers effectively gain a competitive edge by building a
loyal customer base
 Customer Lifetime Value: Recognizing the value of long-term
customer relationships allows companies to focus on maximizing
customer lifetime value, considering the potential revenue over the
entire customer-business relationship
Customer Retention Strategies

 Loyalty Programs: Offering rewards, discounts, or exclusive perks to

customers who make repeat purchases
 Exceptional Customer Service: Providing timely and helpful support
to address customer issues or inquiries, enhancing overall satisfaction
 Personalized Marketing: Tailoring marketing messages based on
customer preferences, behaviors, and previous interactions
 Continuous Improvement: Regularly updating and improving
products or services based on customer feedback and changing
needs.
Customer Development

 The process of understanding customers' needs, preferences, and

behaviors to continuously improve products or services and better
meet customer demands

 By focusing on customer development, businesses can adapt and

evolve their offerings to stay competitive and better serve their target
audience
Customer Development Strategies

 Market Research: Conduct comprehensive market research to

understand the target audience, their demographics, preferences,
behaviors, and pain points
 Segmentation: Divide the target market into distinct segments. This
enables businesses to tailor their products, marketing messages, and
customer experiences to specific customer segments for better
engagement and conversion
 Customer Feedback Mechanisms: Establishing robust feedback
mechanisms enables continuous learning and improvement based on
customer insights.
Customer Development Strategies

 Product Development: Adopting agile development methodologies

allows you to respond quickly to changing customer needs and
market dynamics
 Pilot Testing / Test Marketing: Introduce new products or features to
a limited audience and gather feedback before a full-scale launch.
This allows businesses to identify potential issues, refine the product,
and generate early momentum and buzz within the target market
Marketing Funnel

 Visual representation of the process through which people go from

first learning about a brand to becoming loyal customers

 A journey map adopts the customer's perspective, but a funnel

considers that same process from the position of the business

 The structure of a marketing funnel is simpler than a journey map

Customer Journey Map
Marketing Funnel
Thank You