... 1) The lifetime value of a typical customer in each segment when the discount rate is 15%. * Exhibit 1 shows that the customer lifetime value for each segment with a 15% discount rate. * The lifetime value of a typical customer in the platinum( top 20%) segment is worth $3496. * The lifetime value of a typical customer in the platinum( low 80%) segment is worth $2394. * The lifetime value of a typical customer in the gold ( top 20%) segment is worth $1415. * The lifetime value of a typical customer in the gold ( low 80%) segment is worth $769. * The lifetime value of a typical customer in the Silver( top 20%) segment is worth $406. * The lifetime value of a typical customer in the Sliver( low 80%) segment is worth $153. * The lifetime value of a typical customer in the inactive customers segment is worth $40. * The lifetime value of a typical customer in the low customers segment is worth $0. * * If the existing customers were to be economically valued, as an asset of the company, how much would they be worth? * The economic value of the existing customers can be calculated by multiplying the customer lifetime value of each segment by the segment’s size and then summing the value of all segments. * Total value, in today’s dollars, of the existing customer database will be $15,024,938. ( Shown in the Exhibit 2） * * Question 2 1) The lifetime value of a typical customer in each segment when...
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...www.hbr.org It’s a dirty little secret: Most executives cannot articulate the objective, scope, and advantage of their business in a simple statement. If they can’t, neither can anyone else. Can You Say What Your Strategy Is? by David J. Collis and Michael G. Rukstad Reprint R0804E It’s a dirty little secret: Most executives cannot articulate the objective, scope, and advantage of their business in a simple statement. If they can’t, neither can anyone else. Can You Say What Your Strategy Is? by David J. Collis and Michael G. Rukstad COPYRIGHT © 2008 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. Can you summarize your company’s strategy in 35 words or less? If so, would your colleagues put it the same way? It is our experience that very few executives can honestly answer these simple questions in the affirmative. And the companies that those executives work for are often the most successful in their industry. One is Edward Jones, a St. Louis–based brokerage firm with which one of us has been involved for more than 10 years. The fourth-largest brokerage in the United States, Jones has quadrupled its market share during the past two decades, has consistently outperformed its rivals in terms of ROI through bull and bear markets, and has been a fixture on Fortune’s list of the top companies to work for. It’s a safe bet that just about every one of its 37,000 employees could express the company’s succinct strategy statement: Jones aims to...
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...commercial painting contractors—a key customer segment—the company learned that labor constituted the lion’s share of contractors’ costs, while paint made up just 15% of costs. Armed with this insight, the resin maker emphasized that its product dried so fast that contractors could apply two coats in one day—substantially lowering labor costs. Customers snapped up the product—and happily shelled out a 40% price premium for it. To craft compelling customer value propositions: UNDERSTAND CUSTOMERS’ BUSINESSES Invest time and effort to understand your customers’ businesses and identify their unique requirements and preferences. Example: The resin manufacturer deepened its understanding of key customers in several ways. It enrolled managers in courses on how painting contractors estimate jobs. It conducted focus groups and field tests to study products’ performance on crucial criteria. It also asked customers to identify performance trade-offs they were willing to make and to indicate their willingness to pay for paints that delivered enhanced performance. And it stayed current on customer needs by joining industry associations composed of key customer segments. SUBSTANTIATE YOUR VALUE CLAIMS “We can save you money!” won’t cut it as a customer value proposition. Back up this claim in accessible, persuasive language that describes the differences between your offerings and rivals’ that matter most to customers. And explain how those differences translate ...
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...“Managing Customer Value” suggests that customers might be the key to improve profits. Customers are assets to firms; they generate revenues. However, some assets generate more revenues than other. In order to foster maximum returns from the customers, it becomes imperative to understand the differences between customers groups. Recognizing this diversity will enable value extraction from the investments. Unfortunately, most companies are unable to distinguish between the profitable and the unprofitable customers. One approach in measuring and managing customer value is the “Customer Value Management Cycle”. This cycle consists of 5 steps. 1. Customer segmentation; A proper segmentation drives profits by tailoring values to fit different customer needs. Thus, marketing should be correlated to different behaviors that steer customer profitability. Segments are dynamic and should be continuously refined as understanding of customers increases. Finally, including potential customers in the segments is also advantageous as it can help the company meet the needs of these customers. 2. Segment margins; Value from segmenting the customer base will be maximized when the profitability of these segments is measured. This in turn will allow formulating the right strategy and effective management. An effective method to increase margins is to locate the highest costs and figure out if there are possibilities to allocate these costs to customers. 3. Customer Lifetime Value (CLV);...
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... Objective To retain current SBC and AT&T customers pre and post mergers. To acquire non AT&T and SBC customers Target Audience Current SBC and AT&T retail customers. Non AT&T and SBC customers Timeline 2 months pre-merger to 2 years post-merger Communication Plan Contributors * Outsourced communication expert consulting company * Outsourced Marketing Firm * Internal public relations department * Internal Marketing department Approvals Required CEO and VP of Marketing Messaging * Value of how AT&T merger will benefit the customer on service, time, product and technology * Building excitement on what is to come with the merger * Building awareness on what is the new AT&T brand * Building awareness on new and existing products being offered “AT&T is your new and improved communication provider. We are mature enough to know how to do business, and innovative enough to provide you the best products and services to keep you connected all under one roof” Challenges * Customer confusion in the transition with billing * Customer confusion with product line of new company * Customers not seeing the value in the merger * Customer succumbing to competitor messaging. Competitor Messaging Research what the competitors are saying about the merger to their customer base and create messaging to counteract. Communication Plan Budget $20 Million...
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...Make up for Missed Class Case: Customer Value Propositions in Business Markets Basic Case Identification Who is/are protagonist(s) or decision maker(s)? Companies that offer a service product to a customer What is the primary decision that must be made? What constitutes a customer value proposition and what makes one persuasive to the customer? Primary Alternatives to Consider for Value Propositions 1) All Benefits - preferred by most managers; - list all the products benefits; - requests the least knowledge about customers and competitors; - negative: benefit assertion (features may have no value for the customer, not knowing anything about the customer or competition may have as an effect missing the points that make the differentiation from the competition and for the customer); 2) Favorable points of benefits – recognizes the existence of the alternative - requires to know the differences between own product and next best alternative and the customer’s requirements; - drawback: value presumption (assumed points of difference may have no value for the customer); 3) Resonating focus- the most valuable - requires a complete understanding of the customer needs and how you can fulfill this through features that are superior to the customer’s offering; - requires extensive research. Ways to substantiate the customer value value word equations: expresses in words...
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...captures value,[1] in economic, social, cultural or other contexts. The process of business model construction is part of business strategy. In theory and practice, the term business model is used for a broad range of informal and formal descriptions to represent core aspects of abusiness, including purpose, business process, target customers, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies. revenue model A description of how a business will earn income, produce profits and generate a higher than average return on investment. In business, a revenue model is generally used for mid and long-term projections of a company's profit potential and operation. the system design by which a business monetizes its services.[1] Examples of revenue models include: * Freemium * Subscription * Affiliate marketing * Ad-funded * Lead generation * Online shopping VALUE PROPOSITION DEFINITION OF 'VALUE PROPOSITION' A business or marketing statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings. INVESTOPEDIA EXPLAINS 'VALUE PROPOSITION' Companies use this statement to target customers who will benefit most from using the company's products, and this helps maintain an economic moat. The ideal value proposition...
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...CHAPTER 1 WHAT IS STRATEGY AND WHY IS IT IMPORTANT? 1. Understand why every company needs a sound strategy to compete successfully, manage the conduct of its business, and strengthen its prospects for long-term success. 2. Develop an awareness of the four most dependable strategic approaches for setting a company apart from rivals and winning a sustainable competitive advantage. 3. Understand that a company’s strategy tends to evolve over time because of changing circumstances and ongoing management efforts to improve the company’s strategy. 4. Learn why it is important for a company to have a viable business model that outlines the company’s customer value proposition and its profit formula. 5. Learn the three tests of a winning strategy. Copyright ®2012 The McGraw-Hill Companies, Inc. McGraw-Hill/Irwin 1–2 WHAT DO WE MEAN BY STRATEGY ? ♦ What is our present situation? ● ● WHAT IS STRATEGY ABOUT? ♦ Strategy is all about How: ● ● ● ● Business environment and industry conditions Firm’s financial and competitive capabilities Creating a vision for the firm’s future direction How to outcompete rivals. How to respond to economic and market conditions and growth opportunities. How to manage functional pieces of the business. How to improve the firm’s financial and market performance. ♦ Where do we want to go from here? ● ♦ How are we going to get there? ● Crafting an action plan that will get us there 1–3 1–4 WHY DO STRATEGY ? ♦ A firm does...
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...Eutsler August 10, 2012 * What is Dell’s strategy for success in the marketplace? Does the company rely primarily on a customer intimacy, operational excellence, or product leadership customer value proposition? What evidence supports your conclusion? Dell’s strategy “combines its direct customer model with a highly efficient manufacturing and supply chain management organization, and an emphasis on standards-based technology” (Dell, 2005, p. 1). The purpose of Dell’s multifaceted strategy is to be efficient when it comes to manufacturing products and effective when it comes to providing services. Dell feels that their business strategy allows them to “provide customers with superior value; high-quality, relevant technology; customized systems; superior service and support; and products and services that are easy to buy and use” (Dell, 2005, p. 1). Dell also focuses on developing new technologies that incorporate consumer-desired features and capabilities at a highly competitive price. Utilizing feedback from customers, Dell engineers “work with a global network of technology companies to architect new system designs, influence the direction of future development, and integrate new technologies into Dell’s products [which allows them to] quickly and efficiently deliver new products and services to the market” (Dell, 2005, p. 2). Dell relies on a combination of customer intimacy, operational excellence, and product leadership customer value propositions in order to maintain...
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...Can You Say What Your Strategy Is? by David J. Collis and Michael G. Rukstad CAN YOU SUMMARIZE YOUR COMPANY’S STRATEGY in 35 words or less? If so, would your colleagues put it the same way? It is our experience that very few executives can honestly answer these simple questions in the affirmative. And the companies that those executives work for are often the most successful in their industry. One is Edward Jones, a St. Louis–based brokerage firm with which one of us has been involved for more than 10 years. The fourth-largest brokerage in the United States, Jones has quadrupled its market share during the past two decades, has consistently outperformed its rivals in terms of ROI through bull and bear markets, and has been a fixture on Fortune’s list of the top companies to work for. It’s a safe bet that just Getty Images and IPNstock 82 Harvard Business Review | April 2008 | hbr.org It’s a dirty little secret: Most executives cannot articulate the objective, scope, and advantage of their business in a simple statement. If they can’t, neither can anyone else. Can You Say What Your Strategy Is? about every one of its 37,000 employees could express the company’s succinct strategy statement: Jones aims to “grow to 17,000 financial advisers by 2012 [from about 10,000 today] by offering trusted and convenient face-to-face financial advice to conservative individual investors who delegate their financial decisions, through a national network of onefinancial-adviser...
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...eBook or a TraditionalCollege Textbook? ASSIGNMENT QUESTIONS 1. Describe the competing business models of traditional textbooks and etextbooks. How do the customer value propositions of the two textbook formats compare? How are the profit formulas of paper textbooks and etextbooks different? Traditional textbooks: - Depends on acquisition editors. - On authors and professors. - Representitive business modle. - Taking into consideration printing costs, shipping costs and row material costs. - Taking into consideration the competietion with local book stores and used books market. eTextbooks: - It will depend as well on acquisition editors, prfessors and authors. - Representatives are enrolled into promoting online platform. - Will get rid from raw material costs such as priniting, paper and ink. - Will get rid from the competition of used books market and local book stores. Customers will value buying a traditional textbook from two perspectives; one is the easiness of reading the book and taking notes and at the same time they can sell it back to the used books market for a discounted price. They could have even save some money by renting the book or buying a used one. However, different editions were introducd frequently, which was an obstacle to them on this regard. On the other hand, customers may value buying an etexbook in another way. First, the buying price would less than a traditional textbook. Also, they could have many books in a simple device that...
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... Cristina Del Molino Pavlos Exarchos Felipe Ize Achieving customer-management excellence in emerging markets Winners ask four critical questions about market-by-market growth, then tailor their channel-management approaches accordingly. For producers of consumer packaged goods, the road to sustained growth still passes through emerging markets. Despite some softening of enthusiasm for investment in the so-called BRIC markets—Brazil, Russia, India, and China—over the next 15 years nearly three-quarters of the world’s GDP growth will continue to come from emerging-market countries, including Ethiopia, India, Kenya, Mexico, Nigeria, and Vietnam. Growth in these parts of the world is being driven by forces that don’t show any signs of weakening: steady population expansion, rapid urbanization, a proliferation of technology, and gradual opening up of economies and adoption of market-oriented policies. Global packaged-goods producers can gain significant foothold in these markets if they manage talent shortages, infrastructure gaps, and the highly fragmented trade landscape. There is no one-size-fits-all approach to doing this. Our research demonstrates that outperforming consumer-packaged-goods (CPG) companies use a set of standardized practices or tools across markets to determine their priorities for growth in each country. They clearly define their value propositions for customers, achieve optimal distribution, and continually strive to build...
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...Customer Value Proposition Key Points: The centerpiece of a strategy is the customer value proposition. The value proposition—as its name states—should describe the value an organization provides to its customers through its products and services. There are three kinds of value propositions: all benefits, favorable points of difference and resonating focus. Further, there are three generic value propositions themselves: operational excellence, customer intimacy and product/service Innovation. Main Thoughts: The centerpiece of a good strategy is a well-crafted value proposition. A firm’s value proposition articulates the value that a firm provides through its products and services to its targetd customers. The concept of the value proposition is not new; managers, marketers and sales professionals have for years being sharpening their messaging regarding what their products are worth to customers for years. Within the past decade however, researchers have provided clarity on both the kinds of value propositions that exist and the generic types of value propositions that firms use when developing their strategies. Kinds of Value Propositions Researchers Anderson, Narus and van Rossum identify three different kinds of value propositions from their work with organizations throughout Europe and the United States. All Benefits All benefits simply lists all of the benefits that an organization provides to its target customers. While comprehensive, it tends to suffer...
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...Starbucks: Delivering Customer Service In late 2002, Christine Day, Starbucks’ senior vice president of administration in North America, discovered that the company was not meeting customer expectations and that there was a decline in customer satisfaction. Day attributed the decline in customer satisfaction to a service gap, particularly service speed. Day must decide whether she will proceed with her plan to invest an annual $40 million across its 4,500 company stores. The investment would allow each store an additional 20 hours of labor per week. The objective is to improve service speeds and in turn increase customer satisfaction. We recommend that Starbucks proceed with the investment in labor. Customer service and satisfaction is one of Starbucks’ core competencies. If Day does not address the decline in satisfaction levels, Starbucks can potentially dilute its brand and ultimately lose market share reversing the sales growth achievements attained in the last eleven years. Starbucks’ Success In the last decade, Starbucks had consecutively achieved 5% or higher in comparable store sales growth. This success was due to several factors, primarily to its value proposition. Starbucks’ value proposition consisted of three components: the quality of coffee, the service provided, and store atmosphere. Starbucks prided itself in serving the highest-quality coffee in the industry. To maintain its coffee exacting standards, the company strived to control as much of the...
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...Customer Acquisition Customer acquisition is a broad term that is used to identify the processes and procedures used to locate, qualify and ultimately secure the business of new customers. There are many different strategies used as part of the acquisition process, with some methods being more effective with specific types of potential clients. In spite of the many and sometimes contradictory ideas that surround the central idea of how to earn a customer, there are a few essentials that are included in just about any type of customer acquisition plan. One of the basics of any customer acquisition effort is to identify and quality potential customers. This is sometimes accomplished with the use of telemarketing as a means of locating individuals and businesses who either express interest in or already use products similar to those produced by the business. From this initial list, these leads are then qualified a little further, using various research methods to determine if there is any solid chance of making a sale with a given lead. If there is a good chance, and the contact is interested in learning more about the products offered, his or her status is usually upgraded to that of prospect, and assigned to a salesperson for further interaction. Establishing rapport with the prospect is essential to any successful customer acquisition effort. Here, the salesperson finds ways to identify with the stated wants and needs of the prospect, and how the products offered can relate...
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