Premium Essay

Customer Lifetime Value and Return on Marketing

In: Business and Management

Submitted By plformilleza
Words 1465
Pages 6
Case Study: Conroy’s Acura: Customer Lifetime Value and Return on Marketing

Case Summary:
Conroy’s Acura was founded in November 1986 by Ross Conroy, a veteran of the car industry who also owned a General Motors dealership to open in Toronto and one of the first in North America. Located in downtown Toronto, Conroy’s Acura sold both new and pre-owned vehicles, and its service department was dedicated to Acura Products. Conroy’s Acura was an independently owned dealership that held a franchise agreement with Honda Acura’s parent company. It has been a successful company amidst the number of competitors since 1986. And now, it needs to create less expense or cost efficient strategies to increase the number of customers and most importantly, sales. Allowing Employees and the other people in the work force to contribute to the brainstorming of new ideas, this became an interactive company work. Given that advertising will not be that purely effective for it, since it can only attract an indefinite number or potential customers.

Statement of the Problem: What effective way/s should the Conroy’s Acura company be doing sto increase customer lifetime value on marketing, sales and profit?
Analysis of the Data Data:
Organizational Structure The company has a Functional Organizational Structure The company’s employees are organized by what they should do in their work. There is one top line manager, Terrence Conroy, he is the person who manages and controls the company. He is also a democratic leader who gives the employees an opportunity to hear the voices of very employees. Then there is Rachel De Lima the vice of sales and the rest are the salespeople, and the two administrative assistants and the technicians which works efficiently in the firm. Organizational Culture The organizational culture of the company is a Market Culture, seeing that

Similar Documents

Premium Essay

Value

...Life time value of a customer: Concept and Application Introduction In today’s dynamic business world of changing face of customers is a challenge to reckon with. Companies are increasingly faced with the task of keeping track of their customers, maintaining consistency within the organization and satisfying needs so as to enjoy continued patronage. It’s requirement to build and maintain successful individual-level customer relationships in order to maximize profitability and ensure customer loyalty for future profitability. Relationships with customers are not always secure. It is difficult to predict for how long the customer is going to stay with a firm in a non-contractual setting. Customer management strategies are aimed at addressing the needs of every customer and by developing a one-on-one relationship with them Companies’ outlook can be broadly categorized into two types namely, Product-centric and Customer-centric. Product-centric firms concentrate more on their product line and therefore on increasing the product line for customers. In marketing, the economic value of a customer during the life of the customer's association with a business. An estimate of customer lifetime value allows a business to determine the amount of money that can be spent on acquiring and retaining a customer .The shareholder value and the customer lifetime value approach are conceptually and methodically analogous. Both concepts calculate the value of a particular decision unit by discounting...

Words: 5033 - Pages: 21

Premium Essay

Custmer Value

...What Are Your Customers Worth? Not all customers are created equal. You need to know their lifetime value, then compare the cost of acquiring, serving, and keeping them. By Sunil Gupta and Donald R. Lehmann Most senior executives say their companies should be customer-focused. Yet in times like these, when budgets are tight, some of the first expenditures to be cut are for marketing and IT, both of which are supposed to help companies better understand and serve customers. Professors Elizabeth Demers of the University of Rochester and Baruch Lev of New York University confirmed these conclusions in a study last year. They found that while investors implicitly capitalize product-development and R&D expenditures, considering them assets that are potentially useful over a long period of time, they expense marketing and customer-acquisition costs. This apparent contradiction stems too often from the fact that business strategies in general and marketing in particular don't look at their customers in terms of quantifiable value, so they don't develop metrics to measure the return on investment in terms of the value of their customers. It's still typical for most companies to organize marketing plans around the 4Ps: product, price, promotion, and place--the traditional view espoused in most marketing textbooks. In addition to leaving out the customer, this focus makes it difficult to measure ROI for marketing activities, and therefore makes getting funding for them difficult. The...

Words: 3149 - Pages: 13

Premium Essay

Comm 131 Chapter 1 Notes

...Capturing Customer Value Marketing: creating value for customers and building strong relationships to capture from customers in return - All about managing profitable customer relationships (satisfying customer needs) Core Customer and Marketplace Concepts 1. Needs wants and demands * Needs: states of felt deprivation * Wants: the form human needs take as shaped by culture and individual personality * Demands: human wants that are backed by buying power 2. Market offerings – products, services, info or experiences offered to satisfy a market need * Marketing myopia: mistake of paying more attention to the products itself than to the benefits and experiences produced by these products (brand experience) 3. Value and satisfaction – must set smart and realistic product expectations for customers 4. Exchanges and relationships – the act of obtaining a desired object from someone by offering something in return 5. Markets – the set of all actual and potential buyers of a product or service Marketing Process 1. Understand the marketplace and customer needs and wants 2. Design a customer-driven marketing strategy 3. Construct an integrated marketing program that delivers superior value 4. Build profitable relationships and create customer delight 5. Capture value from customers to create profits and customer equity Marketing Management: choosing target markets and building relationships with them - Composed of customer management...

Words: 523 - Pages: 3

Premium Essay

Marketing Plan

...1. Executive Summary Interstate Batteries creates batteries for almost every customer need. Batteries provide power to many everyday products that consumers need. Interstate is willing to manufacturer any type of battery that the customer may need. In order to maintain a strong hold in the market place, Interstate must create a new battery. The new battery that Interstate is considering creating is the Lifetime Battery. It is essentially a battery that cycles power back into itself to maintain a lifetime charge. This will eliminate the need to purchase future batteries. With this marketing plan, a situation analysis, marketing strategy, financial projections, implementation plan, and control metrics will all be performed to justify the need or importance of the Lifetime Battery. 2. Company Overview Interstate Batteries is a battery provider that provides batteries for many different needs. Cars, electronics, marine equipment, accessories, etc. are some of the top items that Interstate produces batteries for. Interstate is the number one replacement brand battery in North America. According to Interstate Batteries (n.d.) “Interstate continues to thrive on our innovation, as well as our good old-fashioned business principles founded on treating others like we would like to be treated” (para. 1). Interstate is a privately held corporation and has continued to thrive, even during tough economic times. Interstates purpose is “To glorify God and enrich lives as we deliver the...

Words: 1675 - Pages: 7

Premium Essay

Customer Portfolio

...Table of Contents I. Introduction 2 II. Customer portfolio concept 3 2.1 Concept of customer portfolio and its application in company 3 2.1.1 Customer Lifetime Value (CLV) 3 2.1.2 Market segmentation 4 2.1.3 Sales forecasting methods 5 2.1.4 Activity based costing 6 2.2 Customer portfolio application of “CDNow” 6 2.3. Concept application for e-tailer companies 8 III. Conclusion 10 References 11 Introduction In business, customers are always considered as the basis of a company’s profitability (Gupta et al., 2004; Hogan et al., 2002; Rappaport, 1998; Wayland and Cole, 1994). It leads to a customer – centric view in practice in general as well as in marketing in particular. According to Rust et al., (2005), the limited resources allocated efficiently for maximizing value requires a relationship – oriented customers and strong, long – lasting customer retention. Focusing on current customers is the right strategy, especially offering a positive lifetime profitability relationship when acquiring new customers is more expensive than retaining existing ones (Morgan and Hunt, 1994; Reichheld and Teal, 1996; Bitran & Mondschein, 1997). However, there is not only lifetime profitability relationship, but also different treatments of customers in marketing tools are advisable. Determining the right strategic balance between acquisition...

Words: 3226 - Pages: 13

Premium Essay

Managing Customer Lifetime Value at Ibm

...Report The Power of CLV: Managing Customer Lifetime Value at IBM J. Mack Robinson College of Business, Georgia State University, Atlanta, Georgia 30303, dr_vk@hotmail.com Darden Graduate School of Business, University of Virginia, Charlottesville, Virginia 22904, venkatesanr@darden.virginia.edu Americas Market Intelligence, IBM Corporation, New York, New York 10589, tbohling@us.ibm.com Americas Market Intelligence, IBM Corporation, Atlanta, Georgia 30327, dmbeck@us.ibm.com V. Kumar Rajkumar Venkatesan Tim Bohling Denise Beckmann C ustomer management activities at firms involve making consistent decisions over time, about: (a) which customers to select for targeting, (b) determining the level of resources to be allocated to the selected customers, and (c) selecting customers to be nurtured to increase future profitability. Measurement of customer profitability and a deep understanding of the link between firm actions and customer profitability are critical for ensuring the success of the above decisions. We present the case study of how IBM used customer lifetime value (CLV) as an indicator of customer profitability and allocated marketing resources based on CLV. CLV was used as a criterion for determining the level of marketing contacts through direct mail, telesales, e-mail, and catalogs for each customer. In a pilot study implemented for about 35,000 customers, this approach led to reallocation of resources for about 14% of the customers as compared to the allocation rules...

Words: 11931 - Pages: 48

Premium Essay

Marketing

...MARKETİNG MANAGEMENT Marketing is a process by which companies create value for customers and build strong customer relationships to capture value from customers in return NEEDS • States of deprivation • Physical—food, clothing, warmth, safety • Social—belonging and affection • Individual—knowledge and self-expression WANTS • Form that needs take as they are shaped by culture And individual personality DEMAND •Wants backed by buying power * Market offerings are some combination of products, services, information, or experiences offered to a market to satisfy a need * Functional benefits • Based on a product attribute that provides the customer with functional utility. • Examples – phone capability of an iPhone, – the thirst-quenching offered by a bottle of water and – the warmth of a wool sweater. • Easy to provide • Easy to imitate * Emotional benefits • provide customers with a positive feeling when they purchase or use a particular brand. • Examples – the “feel-good” factor when purchasing groceries carrying a fair-trade label – Id when purchasing healthy food for your children * Self-expressive benefits • provide an opportunity for someone to communicate his or her self-image. • Examples – The image of being cool projected by the Apple iPhone, – the raw masculinity projected by the Harley-Davidson motorcycle brand or – the luxury displayed by carrying a Louis Vuitton bag. ...

Words: 1100 - Pages: 5

Premium Essay

Mkt Notes

...Chapter 1 **marketing is managing profitable customer relationships. aim to create value for customers in order to capture value from customers in return. create customer value in order to capture value in return. amazon opened 1995 selling books founder jeff bezos's garage in seattle. sales rose from 150$mil in 97 to 48$+ bil today. 173 mil Wwide cust perchase 110items per second. "obsess over customers." most influential to amazon in meeting is "the empty chair" "customer experience bar raiser" amazon was first company to use "collaborative filtering" technology which sifts through each customer's past purchases an the purchaseing patterns of customers with similar profiles to come up with personalized site content. amazon began allowing competing retailers from mom and pop operations to mark and spencer depart stores to offer their products on amazon.com[->0] today's marketers want to become a part of your life and enrich your experiences with their brands--to help you live their brands. **5 core customer and marketplace concepts: needs wants and demands market offerings (products, services, and experiences) value and satisfaction exchanges and relationships markets Wants are shaped by one's society and are described in terms of objects that will satisfy those needs. When backed by buying power, wants become demands. Given their wants and resources, people demand products with benefits that add up to the most value and satisfaction. ...

Words: 923 - Pages: 4

Premium Essay

Mkt Chapter 1

...1 Principles of Marketing Marketing: Managing Profitable Customer Relationships Learning Objectives After studying this chapter, you should be able to: 1. Define marketing and outline the steps in the marketing process 2. Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts 3. Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide marketing strategy 4. Discuss customer relationship management, and identify strategies for creating value for customers and capturing value from customers in return 5. Describe the major trends and forces that are changing the marketing landscape in this age of relationships 1-2 Chapter Concepts 1. 2. 3. 4. 5. 6. 7. 8. What Is Marketing? Understanding the Marketplace and Customer Needs Designing a Customer-Driven Marketing Strategy Preparing an Integrated Marketing Plan and Program Building Customer Relationships Capturing Value from Customers The New Marketing Landscape So, What Is Marketing? Pulling It All Together 1-3 What Is Marketing? Marketing Defined Marketing is the process by which companies create value for customers and build strong customer relationships to capture value from customers in return 1-4 What Is Marketing? The Marketing Process 1. 2. 3. 4. 5. Understand the marketplace and customer wants and needs Design a customer-driven marketing strategy Construct...

Words: 1583 - Pages: 7

Premium Essay

Introcudtion to Marketing

...Chapter One: text notes Amazon- “obsessed over customer” * creating genuine value for customer: every decision is made with an eye toward improving Amazon.com cutomer experience. * Analyst predict by 2015 Amazon will become the youngest company in history to hit $100 billion in revenue ( walmart:34years). Nation’s second largest retailer. * customer experience bar raiser: representing customer’s voice * Kindle: first original product-> no.1 selling product * First company to use “ collaborative filtering” which sifts through each customer’s past purchase to make personalized content * Customer feel compelled to stay for a while- leaning, looking, discovering What is marketing * marketing is managing profitable customer relationship * “ the aim of marketing is to make selling unnecessary” * marketing is the process by which companies create value for customer and build strong customer relationships in order to capture value from customers in return understand the needs and want | design a customer driven marketing strategy | marketing program that deliver superior value | build profitable relationship and create customer delight | capture value from customers in return | Understanding market place and customer needs 5 core concepts 1. needs, want, and demands- an American needs food but wants a big Mac ( shaped by one’s society), when backed by buying power wants become demands a. Alan Mulally, CEO of...

Words: 2594 - Pages: 11

Premium Essay

Marketing Plan

.... THE WORLD OF MARKETING IMPORTANCE OF MARKETING THE SCOPE OF MARKETING COMPONY ORIENTATION TOWARDS THE MARKET PLACE FUNDAMENTAL MARKETING CONCEPTS, TRENDS AND TASKS. Defining Marketing An organizational function and a set of processes for creating ,communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others. Defining Marketing An organizational function and a set of processes for creating ,communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others.  Marketing Management is the art and science of choosing target markets and building profitable relationships with them.  Structure of Flows Manufacturer markets Services, money Government markets Services, money Services Services, money Taxes Taxes, goods Taxes, goods Taxes, goods Money Money Consumer markets Intermediary markets Goods, services Goods, services Resources Resources Resource markets Money Money. . QUALITY IN MARKETING Quality has three dimensions Meeting and striving...

Words: 1214 - Pages: 5

Premium Essay

Crm, Customer Relationship Management

...Service 15 VI. INFORMATION TECHNOLOGIES FOR CRM 20 Key CRM Tasks 20 IT Factors of CRM Tasks 22 VII. CONSULTANTS 23 VIII. RETURN ON INVESTMENT OF IMPLEMENTATION 24 Cost and time 24 Benefits 25 ROI of CRM Projects 27 IX. PRINCIPLES OF CRM 27 X. CRM ISSUES 28 Customer Privacy 28 Technical Immaturity 30 XI. CASE STUDIES 31 Amazon.Com 31 Dell 32 Volkswagen 33 Wells Fargo 34 XII. CONCLUSIONS 36 REFERENCES 37 APPENDIX A BASIC ASSUMPTIONS OF CRM 40 APPENDIX B COMMON MYTHS OF CRM 41 APPENDIX C LIFETIME VALUE OF A CUSTOMER 44 C1. Simple Approach 45 C2. More Sophisticated Calculation 46 C3. Effect of Loyalty Programs 47 C4. Additional Factors to Consider 49 C5. The Arithmetic of Lifetime Value 49 C6. Example: Applying Lifetime Value Concepts in Banking 51 C7. Summary and Conclusions on Lifetime Value 53 APPENDIX D VENDOR’S WEB SITE ADDRESSES 55 2 Version 3-6 March 23, 2001 CUSTOMER RELATIONSHIP MANAGEMENT Paul Gray Jongbok Byun I. INTRODUCTION Over a century ago, in small-town America, before the advent of the supermarket, the mall, and the automobile, people went to their neighborhood general store to purchase goods. The proprietor and the small staff recognized the customer by name and knew the customer's preferences and wants. The customer, in turn, remained loyal to the store and made repeated purchases. This idyllic customer relationship disappeared as the nation grew, the population moved from the farm communities to large urban areas, the consumer...

Words: 9056 - Pages: 37

Premium Essay

Marketing

...MARKETING: CREATING AND CAPTURING CUSTOMER VALUE Marketing – the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for consumers, clients, partners, and society at large Understanding the Marketplace and Customer Needs Customer Needs, Wants, and Demands – – – needs: states of self-deprivation  physical needs for food, clothing, warmth, and safety  social needs for belonging and affection  individual needs for knowledge and self-expression wants: form of human needs take as shaped by culture and individual personality demands: human wants that are backed by buying power Market Offerings—Products, Services, and Experiences – – market offerings: some combination of products, services, information, or experiences offered to a market to satisfy a need or want  include products and services  includes other entities, such as people, places, organizations, information, and ideas marketing myopia: mistake of paying more attention to the specific products a company offers than to the benefits and experiences produced by these products  failure by management to properly define their business in terms of customers’ needs and wants  the tendency of management to view its business too narrowly by focusing...

Words: 582 - Pages: 3

Premium Essay

Social Media in Marketing

...WHAT IS MARKETING? Marketing deals with customers. Marketing is the managing profitable customer relationshis. 2 fold goal of marketing - to attract new customers by promising superior value; -keep and grow current customers by delivering satisfaction Today, marketing must be understoodnot in the old sense of making a sale -"telling and selling"- but in the new sense of satisfying customer needs. If the market understands consumer needs; develops products that provide superior customer value; and prics, distribuites, and promote them effectively, there products will sell easily. Marketing: the process by which companies create value for customers and build strong customers relationships in order to capture value from customer relationships. 5 steps of marketing process: companies work to undersand consumer, create value and build trong relationships---> 1. understend the market place and customer need and wants. 2. design a customer-driven marketing strategy. 3. construct an integrated marketing program that delivers superiors value. 4. build profitable relationships and create custumer delight. capture value from customers in return---> 5. capture value from custumers to create profits and customer equity. 1. Understanding the marketplace and Customer needs. Custumer Needs, Wants and Demands. Needs: states of felt deprovation; 1. physical (food, clothing, warmth, safety); 2. social (belonging and affection); 3. individual (knowledge and selfespression) Wants: the form of human...

Words: 1785 - Pages: 8

Premium Essay

Rbc Financical

...Group? At RBC , initially the the CRM model worked as follows - • Customer Profitability and Potential Measurement • Aggregate Information rather Actual Data For Customer Profitability measurement, the model aggregated information from a base of 8million data points(customer base) and distributed the profits over 1/10th each The 100/20 rule- this meant that 20% customers accounted for 100% profit.The model divided the customer base into three large baskets - a. Basket “A” = > customers made the most profit b. Basket “B” => customers made some profit c. Basket “C” => customers broke even or lost money This helped in aligning the sales force to customer profitability and laid the foundation for a customer centric firm. However, this wasn’t evolved sufficiently to enable channel optimization and relationship pricing. Also, it was observed that in some instances customers were treated without consideration of potential business they can contribute. Customer profitability calculations were not enough as customer could be both profitable and potentially profitable, bank needs both kind of customers. 2   Finally, calculated Future Profitability and Lifetime Value & segmentation is done based on Future Profitability and Lifetime Value 1) Calculate Present Value of Profit : We assume that profitability percentile of client remains constant throughout expected lifetime, and calculate the present value of those profits 2) Factor in Variables: Such as: Age, Tenure with...

Words: 852 - Pages: 4