Scribd
Upload
52 views18 pages

Chapter 5

This document discusses various customer marketing metrics including customer counts, recency, retention rate, customer profitability, customer lifetime value, prospect lifetime value, acquisition cost, and retention cost. It provides definitions and formulas for calculating each metric. Examples are given to demonstrate how to calculate customer lifetime value, acquisition cost, and retention cost. The purpose of understanding these metrics is to evaluate customer relationships and marketing program effectiveness.

Uploaded by

Khánh Linh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
52 views18 pages

Chapter 5

This document discusses various customer marketing metrics including customer counts, recency, retention rate, customer profitability, customer lifetime value, prospect lifetime value, acquisition cost, and retention cost. It provides definitions and formulas for calculating each metric. Examples are given to demonstrate how to calculate customer lifetime value, acquisition cost, and retention cost. The purpose of understanding these metrics is to evaluate customer relationships and marketing program effectiveness.

Uploaded by

Khánh Linh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 18

1

MARKETING METRICS
TS. LÊ THÙY HƯƠNG
KHOA MARKETING
2

Chapter 5
Customer Profitability
5.1 Customers, Recency, and Retention 3

 Customer Counts: These are the number of customers of a firm for a


specified time period.
 Recency: This refers to the length of time since a customer’s last purchase.
 Retention Rate: This is the ratio of the number of retained customers to
the number at risk.
Purpose: To monitor firm performance in attracting and retaining
customers
5.2 Customer Profit 4

 Customer profit (CP) is the profit the firm makes


from serving a customer or customer group over a
specified period of time.
 Customer Profitability: The difference between
the revenues earned from and the costs associated
with the customer relationship during a specified
period.
Purpose: To identify the profitability of individual
customers.
5.2 Customer Profit 5

 EXAMPLE: A catalog retailer has grouped customers in


10 deciles based on profitability
5.2 Customer Profit 6
5.2 Customer Profit 7
5.2 Customer Profit 8
5.3 Customer Lifetime Value 9

 Customer Lifetime Value (CLV): The present value of the future cash
flows
 When margins and retention rates are constant, the following formula
can be used to calculate the lifetime value of a customer relationship:

Purpose: To assess the value of each customer.


5.3 Customer Lifetime Value 10
 EXAMPLE: An Internet Service Provider (ISP) charges $19.95 per
month. Variable costs are about $1.50 per account per month. With
marketing spending of $6 per year, their attrition is only 0.5% per
month. At a monthly discount rate of 1%, what is the CLV of a
customer?
5.3 Customer Lifetime Value 11

Exercise:
 TH True milk sells fresh milk for 8,000 VND a box.
Depreciation of unit fixed costs is VND 500, unit variable
cost is VND 5,500. Retention Rate = 85%. Discount Rate
= 1%. Calculate CLV of a customer.
5.4 Prospect Lifetime Value 12
 Prospect lifetime value is the expected value of a
prospect. It is the value expected from the prospect minus
the cost of prospecting.

Purpose: To account for the lifetime value of a newly acquired customer


(CLV) when making prospecting decisions.
5.4 Prospect Lifetime Value 13
5.4 Prospect Lifetime Value 14
5.4 Prospect Lifetime Value 15
Exercise
A company named Lotus plans to spend $100,000 on an sale
promotion campaign reaching 50,000 ppl. If Lotus expects 5,000
will purchase with initial price of $5 per product and total unit
cost of $3 and the CLV of the acquired customers is $20. Should
the company carry out this sale promotion campaign? Calculate
its Break-Even Acquisition Rate.
5.5 Acquisition Versus Retention Cost 16
 The firm’s average acquisition cost is the ratio of acquisition spending to the number of
customers acquired.
 The average retention cost is the ratio of retention spending directed toward a group of
customers to the number of those customers successfully retained.

Purpose: To determine the firm’s cost of acquisition and retention.


5.5 Acquisition Versus Retention Cost 17

EXAMPLE
During the past year, a regional pest control service spent $1.4 million and
acquired 64,800 new customers. Of the 154,890 customer relationships in
existence at the start of the year, only 87,957 remained at the end of the year,
despite about $500,000 spent during the year in attempts to retain the
154,890 customers.
Average acquisition cost is $1,400/64.8 = $21.60 per customer.
Average yearly retention cost is $500,000/87,957 = $5.68.
5.5 Acquisition Versus Retention Cost 18

Exercise
A coffee shop last month spent $7,000 on acquiring
1,000 new customers and $4,000 on 700 customers
remaining at the end of the month. Compare Average
acquisition cost and Average retention cost of the
coffee shop.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy