Life Time Value Analysis
Essay title: Life Time Value Analysis
According to the text a lifetime value analysis is “a data manipulation technique that projects the future value of the customer over a period of years using the assumption that marketing to repeat customers is more profitable than marketing to first-time buyers”. I decided to conduct a lifetime value analysis with a product that is near and dear to my heart (unfortunately). I calculated the amount of money spent on soda. Using the price for a 24 pack to determine the amount for a can of pop I have drank 14,235 cans over the last 13 years with an average of 3 cans per day. I figured I would begin when I was 10. A case of pop today is about $6 and based on that I have spent $3,558.75 in 13 years. I determined that soda has risen 5.2% every year since 1995.
Marketing has changed drastically over the years and there are always new ways of reaching your customers. Chapter 19 explains the approach of customer relationship management (CRM). This concept is important because the power has shifted from the producers and retailers to the customers. Years ago there were only a few companies to choose from and what ever they sold is what you bought. Not any more. Companies have to know what people want to stay profitable. There are six steps in the CRM cycle and the first is to identify customer relationships. This is gathering information about who your customers are, where they are and what they are buying. Second is to understand interactions with current customers. It is important to keep loyal customers as well as acquire new ones. Third is to capture relevant customer data on interactions. This is more information gathering to further understand what your customers are doing. For example a sales person should know the customer so well that they know what they want even before the customer does. Being able to anticipate their needs is they key to selling. Storing and integrating the data is the fourth step. Fifth is identifying the profitable and unprofitable customers. This way you will not waste resources marketing to people that aren’t going to buy your product or service. The last step is leveraging customer information, which is essentially getting the right information to the right person, at the right place, at the right time.
Basically the whole idea behind this process is to serve customers better. If you know what they want, you can give it to them. Certain markets like certain packaging and by using the technology that gathers information about what people are buying they can act accordingly. Also, having this information can assist businesses in identifying problem areas and how to fix them.
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