CUSTOMER RELATIONSHIP
MANAGEMENT
NAVEEN KUMAR J P
SATHISH KUMAR K
CUSTOMER LIFETIME
VALUE
&
IMPLEMENTING
CUSTOMER
• Customer is the greatest asset
to any business
• Current customer will remain
as customer in future
• Customer is the basic reason
for company’s existence
• The importance of customer is
known to everyone in business
• Many business do not the
value of customer in terms of
rupees
CRM
• From small enterprises to
multinational corporations,
any business maintains
regular interactions with
customer benefit from a
well organized CRM system
• CRM includes all business
process in sales, marketing
and service that touch the
customer
• By CRM Software tools an
enterprise might build a
database about its customer
in detail
How sales people use customer
information
• To improve customer
strategies
• To grow, retain, or win
customers
• To maximize customer
lifetime value
• Data about the customer is
the fuel to the CLV engine
Customer Lifetime Value
• “Customer lifetime value is
not just a number it is a way
of thinking and doing
business”
• Customer lifetime value is
the present value of future
profits
• Customer life time value
changes the business
perspective to a greater
extent
Increase CLV
• Increase the profits generated from that customer
• To up-sell or cross-sell to the same customer
• Make your existing customers to buy more products from you
and buy it more often
• High customer satisfaction in long run increases CLV
Calculating CLV
• Estimated annual profit from
the customer
• Duration of business
relationship with the customer
• Current discount rate
• In reality it is difficult to make
accurate calculations of
customer lifetime value
because the specific
calculation depends on the
nature of customer relationship
FORMULA
• The CLV of the customer i is the discount value of the future
profits yield by the customer
𝐶𝐹
CLV (i) =∑
(1+𝑑)
Where
CF = net cash flow generated by the customer i activity at
time t
d = discount rate
• The CLV is the value added, by an individual customer, to the
company.
Calculating your CLV
• Let say you have a customer who generated Rs.3000 profit
every year for next 10 years. If the current discount rate is 8
%, then the customer life time value will be:
CLV = I = 10 Si 3000/1.08 i= 20,130.25
CLV = 3000/1.08 + 3000/1.08 2 + 3000/1.08 3 +
………………+ 3000/1.08 10
• This means that the customer is worth Rs.20,130 today
Segmenting Customers
• Segmentation is based on
loyalty and profitability
• Companies around the
world are increasingly
segmenting their customers
in order to increase their
profitability
• Segmenting helps
companies to tailor their
offerings to each of the
segment
Condt…..
• Companies tailor their offerings and marketing strategies to
convert existing customers to become more loyal and more
profitable
• By knowing the current value of the customer you can
segment your customer in different categories
• It helps to concentrate more on profitable customers
• Segmenting helps companies to allocate their marketing
resources based on the customer value
CUSTOMER RETENTION
• Mostly they try to attract new
customers rather than retaining
existing ones
• Acquiring a new customer cost
a lot more than retaining one
• It is wise to measure customer
satisfaction regularly
• The key to customer retention
is customer satisfaction
SATISFIED CUSTOMER
• Stays loyal longer
• Buys more products or
services
• Pays less attention to
competing products or services
• Less sensitive to price and
offers
• Satisfied customers costs less
to serve than a new customers
Condt….
• Highly satisfied customers often recommend to friends,
relatives and others
• Increase new customers and referral sales
• The cost of acquiring new customers by referrals is
substantially lower than traditional methods
• High customer satisfaction in long run results in lower
customer acquisition costs and higher margins
Advantages of CLV
• Determination of the
optimal level of investments
in marketing and sales
activities
• Encourages marketers to
focus on the focus on the
long term value of
customers instead of
investing resources in
acquiring cheap customers
with low total revenue
value.
Condt….
• Implementation of sensitivity analysis in order to determine
getting impact by spending extra money on each customers.
• Optimal allocation of limited resources for ongoing marketing
activities in order to achieve an maximum return
• Measurement of customers loyalty
Maximize CLV
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