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Managing Customers as Investments The Strategic Value of Customers in the Long Run

Book Description

What's a customer really worth? Can you find out, without endlesslycomplex modeling? And once you know, what should you do with thatknowledge? Managing Your Customers as Investments has the answers.You'll learn simple ways to get reliable customer value information--ina form you can use. You'll discover how to use it to measure marketingeffectiveness, generate improvements throughout the entire customerrelationship lifecycle, and improve decision-making. Everyone tells youto manage your business around customers. This book gives you the toolsto do it.

Table of Contents

  1. Copyright
    1. Dedication
  2. PRAISE FOR Managing Customers as Investments
  3. Acknowledgments
  4. 1. CUSTOMERS ARE ASSETS
    1. IMPORTANCE OF CUSTOMERS
    2. THE GAP BETWEEN BELIEFS AND ACTIONS
    3. BRIDGING THE GAP
    4. THE PLAN OF THE BOOK
    5. SUMMARY
  5. 2. THE VALUE OF A CUSTOMER
    1. CUSTOMER LIFETIME VALUE
    2. CREATING METRICS THAT MATTER
      1. Data Requirements
      2. Complexity
      3. Illusion of Precision
    3. A SIMPLE APPROACH
    4. HOW REASONABLE ARE OUR ASSUMPTIONS?
      1. Margin[12]
      2. Retention Rate
      3. Time Horizon
    5. MODIFICATIONS AND EXTENSIONS
      1. Margin Growth
        1. Constant Growth in Margins
        2. Margins Grow at a Decreasing Rate
      2. Improving Retention
      3. Finite Time Horizon
    6. SUMMARY
  6. 3. CUSTOMER-BASED STRATEGY
    1. TRADITIONAL MARKETING STRATEGY
    2. VALUE TO THE FIRM VS. VALUE TO THE CUSTOMER
      1. The Two Sides of Customer Value
    3. KEY MARKETING METRICS
      1. Traditional Metrics
      2. Customer Metrics
    4. TRADITIONAL VS. CUSTOMER-BASED STRATEGY: A CASE STUDY
    5. DRIVERS OF CUSTOMER PROFITABILITY
      1. Customer Acquisition
        1. Gerald Stevens
        2. Ameritrade
        3. CDNow
        4. The European Cable Industry
        5. Acquiring Customers in Emerging Markets
        6. Choosing the Right Customer
      2. Customer Margin
        1. Share of Wallet
        2. Cross-selling
        3. Redefining Your Business and Product Line
        4. Easier Said Than Done
      3. Customer Retention
        1. Impact of Retention on Share
        2. Impact of Retention on Profits—the U.S. Wireless Industry
        3. Retention Elasticity
    6. SUMMARY
  7. 4. CUSTOMER-BASED VALUATION
    1. CUSTOMER ACQUISITION VIA FIRM ACQUISITION
      1. AT&T's Acquisition of TCI and MediaOne
        1. Why Seek Growth in Cable?
        2. The Economics
        3. The Reality
        4. Will They Ever Learn?
      2. Acquisitions in the European Utility Industry
    2. FROM CUSTOMER VALUE TO FIRM VALUE
      1. The Rise and Fall of Internet Gurus
      2. The Eyeballs Have It—or Do They?
      3. Customer-Based Valuation
    3. DRIVERS OF CUSTOMER AND FIRM VALUE
      1. Impact of Marketing Actions on Firm Value
      2. Impact of Marketing and Financial Instruments on Firm Value
    4. VALUING NETFLIX
    5. SUMMARY
  8. 5. CUSTOMER-BASED PLANNING
    1. STEP 1: CUSTOMER OBJECTIVES
      1. The Case of Evergreen Trust[1]
      2. The Case of Lipitor
    2. STEP 2: UNDERSTANDING SOURCES OF VALUE TO CUSTOMERS
      1. Economic Value
      2. Functional Value
      3. Psychological Value
    3. STEP 3: DESIGNING MARKETING PROGRAMS
      1. Marketing Mix—the 4 Ps
      2. Managing Customer Touchpoints
      3. Loyalty Programs[10]
      4. Database Marketing
    4. STEP 4: CUSTOMER METRICS FOR ASSESSING EFFECTIVENESS OF PROGRAMS
      1. Choosing and Using the Right Metrics
    5. SUMMARY
  9. 6. CUSTOMER-BASED ORGANIZATION
    1. ORGANIZATIONAL STRUCTURE
      1. The Case of L.L. Bean[1]
    2. INCENTIVE SYSTEMS
    3. EMPLOYEE SELECTION AND TRAINING
    4. CUSTOMER-BASED COSTING
    5. NEW METRICS
    6. WHO NEEDS TO DO WHAT: TASKS FOR VARIOUS PARTIES
      1. CEO
      2. CFO
      3. CMO
      4. Product Managers
      5. Marketing Research
      6. Specialists
    7. HARRAH'S ENTERTAINMENT, INC.: A WINNING HAND IN A DICEY BUSINESS[6]
      1. The Strategy
      2. Organization Structure
      3. Customer-Based Strategy
      4. Customer Service and Employee Incentives
      5. Metrics
      6. The Jackpot
    8. COMMON MISTAKES IN IMPLEMENTING A CUSTOMER-BASED STRATEGY
    9. CONCLUDING REMARKS
  10. A. ESTIMATING CUSTOMER LIFETIME VALUE (CLV)
    1. CLV WITH CONSTANT MARGIN, CONSTANT RETENTION, AND INFINITE TIME HORIZON
    2. CLV WITH GROWING MARGINS
    3. CLV WITH IMPROVING RETENTION
    4. CLV WITH A FINITE CUSTOMER LIFE
  11. B. IMPACT OF RETENTION ON SHARE AND PROFITS
    1. IMPACT OF RETENTION ON SHARE
    2. IMPACT ON PROFIT: RETENTION VS. MARGIN ELASTICITY
  12. C. VALUE OF CUSTOMER BASE
    1. VALUE OF A FIRM'S CUSTOMER BASE
  13. ENDNOTES
    1. CHAPTER 1
    2. CHAPTER 2
    3. CHAPTER 3
    4. CHAPTER 4
    5. CHAPTER 5
    6. CHAPTER 6
    7. APPENDIX A
    8. APPENDIX C