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Topics and Objectives:
Today we'llcover a variety of customer metrics - including customer value, profitability and lifetime value. We'll also see how customer
economics can be used to guide marketing strategy.
Required Readings:
Introduction to Customer-Based Marketing Metrics, Chapter 5 in CRM: A Databased Approach by V. Kumar and Werner Reinartz
In class we will discuss the end of chapter exercise questions 1, 2 and 4 - and also mini-case 5.1 (page 106 of the chapter).
Customer Value Metrics: Concepts and Practices, Chapter 6 in CRM: A Databased Approach by V. Kumar and Werner Reinartz
Warning: there are several errors in this chapter.
I will hand out corrections (for equations 4 and 5 on page 113; for equations 13 and 14 on page 127; to table 6-12 on page 128; and onpages 129 and 130 references to hockey equipment shoud be read as scuba equipment).
Get Out of Here, Newsweek.
Where Money Doesn't Talk, Forbes
Companies and The Customers Who Hate Them, Harvard Business Review, June 2007
Case: Infinity Bank (sent with pre-readings)
Excel file: Infinity Bank.xls
Case Questions:
- Compare and contrast key findings from the product and customer profitability analyses.
- Examine the customer profitability spreadsheet – what do you conclude regarding the profitability of the bank's customer portfolio
(represented by the 2,205 customers in the weighted sample sheet). What insights can be found in the data from the 1,000 sample customers from each category of product cross-holding? Deliverable:
We will split into groups and I will give each group a template with specific summary information to be filled in. Groups will lookat different tabs on the spreadsheet - collectively, all will be covered. .
- Evaluate the proposed 'supermarket' strategy. Given these three bank products which – if any – should be emphasized under this
approach? Why? What are the pros and cons?
- How should the customer-profitability information be used? What should Infinity do about the unprofitable customers?
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