Derek F Martin

All information and opinions expressed in this presentation are strictly personal and do not represent the opinions of my employer..

KnowledgeBridge™:

How to use Customer Lifetime Value To Win C-Suite Support

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@derekfmartin

AGENDA

1. Introductions

2. Why NPS is not enough

3. CLV Equation

a) Revenue/ Customer

b) Service Cost

c) Customer Tenure (Retention)

d) Acquisition Cost

4. Identifying CLV elements in your projects

5. Quantify the benefits

6. Winning the C-Suite

2. Why NPS is Not Enough

Scored:

Subjective: Brand vs Service Interaction

Subjunctive: “Would you Recommend”

Satisfaction Based: ≠

≠

3. Customer Lifetime Value Equation

AR: Ann. Revenue

AC: Ann. Service Cost

CLV = (AR – AC)

Margin

{ } 1+ i R

R

Retention Investment

- AQ

R = retention rate

i = discount rate

AQ: Acquisition

Cost

3. a Annual Revenue

Annual Revenue

Purchase amount: Pricing, Discounting

Purchase Frequency

Cross Sell & Upsell

Marketing Costs

3.b Annual Cost to Service

Cost To service: (Contact volume * cost/contact) + Returns

Contact Frequency

Product Quality

Service Quality: First Call Resolution

Communication Quality: Confusion Based Contacts

Contact Channel

Product & Process Complexity

Audience

Process Consistency

Set Expectations

Manage the volumes and SLA’s

Returns & Complaints

3.c Retention

Retention Statistics you should know and love

Cost of acquiring new customers is up to 5X cost to retain current customers

2% increase in customer retention = cutting costs by 10%

A 5% reduction in attrition rate can increase profits by 20-100%

The customer profitability rate tends to increase over the life of a retained customer

Competitive advantages – maintain market share, customer feedback, reduce “detractors”

3.d Cost of Acquisition

Acquisition Cost

Brand Awareness

Positive Reviews

Net Promoter

Member Get Member

Channel Cost

Inbound phone calls vs outbound phone calls

Email Deliverability increases with Engagement

4. Identifying CLV Components

CLV = (AR – AC)

Margin

{ } 1+ i R

R

Retention Investment

- AQ

CX Examples:

Improve Website Buying Journey

Call Center Agent Training

Allow for direct billing

NPS Tracking at the Agent level

Complaints Handling

5. Quantifying the Benefits

2. CX impact on Sales depends on business model**:

**Peter Kriss, The Value of Customer Experience Quantified, HBR

*Sunil Gupta, “Managing Customers as Investments,” Wharton 2005

CLV*

Retention Rate

1. Retention is one of the most significant value creation levers

5. Quantifying the Benefits: NPS

3. How much is a Net Promoter Worth? 2010AmEx study tracked Member spend and retention behavior of NPS Promoters vs Detractors:

20-25% increase spend

10-20% increase share of wallet

6x reduction in Attrition

10 % decrease in cost to service

PROMOTER =

6. Winning the C-Suite

Start with the primary benefit in mind: Margin, Retention or Acquisition

Measurable Metrics are essential Scorecard metrics Test & Control Pilot & Champion /Challenger

Partner with the metric owner to confirm the project benefits and agree on measurements: Margin: Sales & Operations Retention: Operations and Service Acquisition: Marketing & Sales

Build the project benefits in to the budget: Accountable

Give your Partners all the Credit

Questions?

www.linkedin.com/in/derekfmartin

www.betterbusinessbanter.blogspot.com

@derekfmartin