Thursday, February 12, 2009

How Much does your Customer Worth? Develop Strategies to maximize the returns on your marketing investments.

Individuals, regardless of their particular consumer needs, have different values for companies. Plainly and simply, some customers just offer more profit than others! Whether this is due to their impact on income or on expenses, the maximization of returns on marketing actions will be achieved only when the company takes this dimension into account when developing its communication strategy. It is important to distinguish the most valuable customers and to create differentiated offers and services for them. Treating the base in a homogeneous manner in relation to value means disregarding the different cash flows that result from each profile.

Important Points

 Grouping consumers based on their needs is a common marketing practice. However, individuals with similar needs can provide different financial results for the brand. Therefore, it is essential to map out the most valuable consumers and create differentiated offers and services for them.

 In order to maximize the returns on marketing investments, companies use three main strategies:
1) concentrate on the increase in sales volume,
2) concentrate on the consumer’s spending potential (share of pocket), or
3) concentrate on the consumer’s estimated monetary value throughout the period in which that customer generates income for the brand (lifetime value, or LTV).

 Calculating the LTV for each consumer permits a detailed analysis of the variables that contribute to greater profitability, such as the best products and the most appropriate communication channels.

 There are basically two kinds of consumers: the transactional and the relational. The former are interested in the best prices, regardless of brand, and generally provide very low rates of return for the company. The relational consumers seek trust, personalization of service, and differentiated care. They are more loyal and represent the company’s greatest source of profitability.

 According to the Pareto law, the highest percentage of a brand’s income or profit (typically 80 percent) is obtained from a small portion of the consumer base (typically 20 percent). This practical rule demonstrates that in many cases it is possible to achieve high levels of efficiency through the directed allocation of resources.

 To increase a consumer’s LTV, expand the time during which the customer interacts with the brand to the longest period possible by encouraging purchases of new versions of already acquired products or additional categories of the same brand.


1 comment:

  1. very cleaver idea and good strategies.. to be success


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