PROFITABLE CUSTOMER ENGAGEMENT Concepts, Metrics & Strategies V. Kumar Dr V.Kumar
Chapter 9 Managing Customers in a Multi Dimensional World Instructor s Presentation Slides 2
Introduction Profitably managing customers is a multidimensional task Several key CEV elements need to be managed simultaneously Firms might face organizational or database problems while trying to manage several CEV elements Firms will have to prioritize which CEV metrics they use for managing customer profitably Firms will have to start collecting individual level data for calculating several CEV metrics 3
Implementing the CEV Framework Define firm objectives Align objectives with CEV metrics Decide which CEV metric you want to prioritize Decide which metric can be measured with your data Begin building your data towards the CEV metrics for future analysis 4
Managing the CEV framework Customer Brand Value (CBV), Customer Lifetime Value (CLV), Customer Influence Value (CIV), Customer Referral Value (CRV), Customer Knowledge Value (CKV) are interrelated Firms need to prioritize the management of these metrics The choice of metric for a business has everything to do with the type of business implementing the framework 5
Customer Brand Value A strong brand is the core of any customer engagement Brands need to be seen as viable, before customers can work their way through CBV framework The CBV metric is closely related to the CLV metric Once brand advocacy and premium brand behavior is optimized, CLV can be maximized 6
Customer Lifetime Value Once a strong brand is build, firm should focus on managing CLV as it directly contributes to profits In order to calculate CLV, customer transaction level data is needed Statistical modeling will aid marketers in optimally allocating resources across customer segments Wheel of fortune strategies can be used to maximize CLV CLV is not the only factor that can determine a customer s profitability 7
Customer Referral Value Current customers indirectly contribute to the profits of the firm by referring new customers to the firm Customers act like non-employee salesperson who are compensated for contributing towards the firms profits A firm can maximize CRV by identifying the right customer who can refer profitable customers CRV is used in the B2C setting while BRV is used in the B2B setting 8
Customer Influence Value A firm can attempt to capitalize on CIV only if its customers are present on social media platforms Influencers need not be famous spokespersons; they can be individuals with a broad social media network and considerable clout By choosing the right influencer and by offering the right tangible and intangible benefits, companies can try and maximize CIV 9
Customer Knowledge Value CKV focuses on capitalizing on information customers provide to the firm, in order to improve customer satisfaction and thereby increase buying behavior By encouraging customer feedback, firms increase the number of customer interactions which will lead to higher profits Having a streamlined process and system to manage customer feedback helps firms in keeping customers happy and loyal CKV can be maximized when firm makes communication with customers easy, provides them with incentives to give feedback and encourage customers to collaborate with the firm 10
Note on managing the framework CLV is a crucial metric to any organization which wants to understand the true value of its customers However of the indirect CEV concepts, CRV can be easily quantifiable and can easily be maximized Tracking CIV would be more difficult than tracking CRV as software to track social media needs to be in place CKV is the most difficult to maximize, especially if a firm does not have a streamlined process of tracking and managing customer feedback. 11
Organizational Challenges Knowledge manager Analyzes summarized customer reports according to 3P approach Summarizes analysis and potential strategies in new report for upper management Knowledge team Gathers customer insights and summarizes in reports Implements strategies to encourage customer feedback CMO/CEO Chooses appropriate projects and allocate projects accordingly Also decides how involved customers will be in new product development process Who Does What When integrating customer feedback into the new product and service development process Customers Provide feedback to the firm about existing products and ideas for new products via social media Project managers Develop new products and involve customers in process according to upper management guidelines Launch product New product/service Launch product Let customers know their input helped create a new product 12
Database Management 13
Database Management To implement CEV framework, firms need to store historical data. Data availability is essential to implement CEV framework Exponential growth in need to store big data has significant impact on database management Key issues regarding database management are: (i) data integrity (ii) data accessibility (iii) data security (iv) disaster recovery (v) change management 14
Database Management Data Integrity ensures that the data is of high quality, consistent and accessible. Threat to data integrity can be minimized by Backing up data regularly and storing in an alternate location Controlling access to data through read/write privileges Designing user interfaces that prevent input of invalid data Using error detection and correction while transmitting data By encrypting data 15
Database Management Data Accessibility - is an increasingly important data quality dimension for firms. Data accessibility ensures users can read/ update for business processes As data becomes more accessible, there is a need to maintain data that is understandable and documented Data Security - address the issues of data loss and theft Data security can be achieved by restricting user access to data through user profiles Encryption is another way to protect data Security risks can be minimized by using security software 16
Database Management Disaster Recovery - involves the steps taken to recover data upon the occurrence of a breach or compromise Data needs to be covered with an insurance policy Disaster recovery measures needs to be in place. Disaster recovery measures can be classified into three groups Preventive measures Detective measures Corrective measures Change Management - is the process of determining which changes need to be made to a database, evaluating the effects of those changes, and then implementing the changes. Change management is an necessary evil in maintaining the integrity and accessibility of a company s data Growing company needs would call for changes in database. Managing all these changes well would impact the IT related costs 17
Future of Customer Engagement Big Data can be sourced from many channels RFID, sensors, geolocation, audio visual streaming and through social media It covers many type of data like demographics, transactional Understanding and categorizing big data is relatively new High Velocity The speed with which big data is collected is high. Information is collected at a rate like never before High Volume Big data has been defined as data sets that are too large to be analyzed by traditional software. Actual sizes could vary from terabytes to exabytes High Variety Big data comes from countless unique sources and has many dimensions Analyzing big data would require advanced software. Managers have to decide when their companies would be ready to mine Big data 18
Future of Customer Engagement Type of Data Transactional Data Marketing Data Demographics Attitude Firm Data - Profit - Time of Purchase - Frequency - Emails - Direct mails - Promotions -Age - Income - Employment - Digital data -Neurophysiological data - Organizational Investments - Marketing Spending - Market Share Customer Level Services Marketing Metrics Firm Level Services Marketing Metrics Customer Engagement Value -CLV - CRV/BRV -CKV -CIV - CBV Expected Share of Wallet Expected Churn Rate Expected Service Failure and Recovery rates HR/ Employee Engagement metric Operational metric 19
Future of Customer Engagement 20
Future of Customer Engagement SoLoMo Convergence of social media, location based services and mobile based services SoLoMo changes the way marketers engage with customers Location details help social media players to personalize recommendations SoLoMo provides marketers the ability to pinpoint customers location and sent relevant offers As these technologies become more refined, CLV, CIV, CRV metrics can be maximized based on data gathered from SoLoMo 21
End of Chapter 9 22