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Lehmann offer practical examples and case studies to help companies estimate the lifetime value of their customers. That information, the authors suggest, can then be used to make better strategic decisions about customer acquisition, service, retention and segmentation.
Knowledge Wharton has excerpted a section of the book below. The Customer Is Always Right. For years, managers all over the world have reiterated the need to focus on customers, provide them good value, and improve customer satisfaction.
In fact, metrics such as customer satisfaction and market share have become so predominant that many companies not only track them regularly but also reward their employees based on these measures. However, this kind of customer focus misses one important component — the value of a customer to a company.
Effective customer-based strategies take into consideration the two sides of customer value — the value that a firm provides to a customer and the value of a customer to the firm. This approach recognizes that providing value to a customer requires marketing investment and that the firm must recover this investment.
In other words, this approach combines the traditional marketing view, where the customer is king, with the finance view, where cash is king. This chapter describes how a strategy that focuses on the two sides of customer value differs from traditional marketing strategy. We demonstrate that the two approaches use different metrics for measuring success and frequently lead to quite different insights and strategic decisions.
Finally, we discuss in detail the three strategic pillars of this new approach — customer acquisition, customer margin, and customer retention. Traditional Marketing Strategy A longstanding approach to marketing strategy discussed in almost every marketing management textbook and taught in most business schools can be summed up as consisting of 3 Cs, STP, and 4 Ps.
If a company can fulfill customer needs better than its competitors, it has a market opportunity. This part recognizes that customers are different in terms of their needs for product and services, so a firm has to decide which of these customer segments it should target. After selecting a target segment, the firm needs to decide on the value proposition or positioning of its products with respect to competitive offerings.
The final component of this framework designs the 4 Ps — product, price, place i. This framework is logical and useful.
For example, it is not uncommon for firms to spend billions of dollars on advertising. It also offered billions of dollars in discounts to attract customers. What is the return on these investments? Do they build customer value in the long run? It is difficult, if not impossible, to answer these questions within the traditional marketing framework.
Customer-based strategy does not completely ignore the key principles of the traditional marketing approach.
Providing value to customers is still critical. However, this approach recognizes that marketing investment in customers must be recovered over the long run. Specifically, this approach highlights the two sides of customer value — the value a firm provides to a customer and the value of a customer to a firm.
The first part is the investment, and the second part is the return on this investment. Star Customers get high value from the products and services of the firm. These customers also provide high value to the company by way of high margins, strong loyalty, and longer retention time.
The relationship is balanced, largely equitable, and mutually beneficial. This is clearly a win-win situation where customers get superior value, which earns the firm loyalty and higher profitability.
A firm would be well-advised to build this type of customer. In contrast, Lost Cause customers do not get much value from the products and services of the firm. One cross-sectional study of U.
The other two cases show unbalanced, and hence unstable, relations. In a sense, they are exploited, much like overworked cows or farmed-out fields. These customers are vulnerable and prone to defect to competitors unless corrective action is taken.
A company can invest in these customers through better product offerings, additional services, and related activities.That kind of thinking led to Honda’s development and marketing of the Acura Legend in the United States.
a customer’s lifetime value is driven by choices, and those choices are driven by. View Todd Staples’ profile on LinkedIn, the world's largest professional community.
improving retention and growing customer lifetime value. Customer lifecycle marketingTitle: ☆Driver of Explosive Growth and . Home» Conroys Acura: Customer Lifetime Value and Return on Marketing Conroys Acura: Customer Lifetime Value and Return on Marketing HBS Case Analysis This entry was posted in Harvard Case Study Analysis Solutions on by Case Solutions.
View Essay - CONROY’S ACURA CUSTOMER LIFETIME VALUE AND RETURN ON MARKETING CASE SOLUTION AND ANALYSIS from MKTG at Ateneo de Zamboanga University.
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