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www.drvkumar.com© Dr. V Kumar
Gaining Competitive Advantage through
Engagement StrategyISB Customer Behavior & Branding PGPpro
V. Kumar, PhDRegents’ Professor,
Richard and Susan Lenny Distinguished Chair & Professor of Marketing, Executive Director, Center for Excellence in Brand & Customer Management,
and Director of the Ph.D. Program in MarketingJ. Mack Robinson College of Business, Georgia State University, Atlanta GA
andChang Jiang Scholar, HUST, Wuhan China.
Fellow, Hagler Institute for Advanced Study, TAMU, College Station, TX Senior Fellow, Indian School of Business, India
Measuring and Maximizing Customer Engagement Value (III)Day 2 – Session 6
April 22, 2018 DelhiApril 29, 2018 Hyderabad
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www.drvkumar.com© Dr. V Kumar
Conceptual Approach to Measure CEV
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• Total value provided by customers to the firms through their (a) purchase transactions with the firm, (b) ability to refer other customers to the firm, (c) power to positively influence other customers about the firm’s offerings , and (d) knowledge about the firm’s product/service offerings in providing a feedback to the firm.
Customer Engagement Value (CEV)
Customer Lifetime Value (CLV)
Net present value of future cash flows
from a customer over his/her lifetime with
the company
Customer Referral Value (CRV)
Quantifiable measure of the type, quantity,
& effectiveness of paid referrals that an individual customer provides to others
Customer Influence Value (CIV)
Monetary value of customers’ social
media influence on other acquired customers and
prospects
Customer Knowledge Value (CKV)
Value a customer adds to the firm through his/her
feedback
Firm and Competitive Actions
Customer Behavior / Attitudes / Network Metrics
Source: Kumar, V. (2013), “Profitable Customer Engagement: Concepts, Metrics & Strategies”, Sage Publications.
Customer Brand Value (CBV)
www.drvkumar.com© Dr. V Kumar
Understanding Business Reference Value
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www.drvkumar.com© Dr. V Kumar
Motivation
• Many firms are using social influence to drive adoption of products and services.
• In a B2B context, the use of client references is often the only tool seller firms have.
• It is unclear to this point the value of or extent to which client references drive new customer adoption.
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Motivation - Examples
SAS encourages customers to create “video success stories” which will be used as references for potential customers.
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Business Reference Value (BRV)
• To compute BRV, we first need a way to measure it.
• We propose that BRV is a function of 3 key components:
1. The amount of influence that business references had on a potential client firm’s adoption.
2. The amount of influence a given reference had on a potential client firm’s adoption.
3. The profitability of the potential client firm.
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BRV Measurement
N
1nt
ninni
nr)(1
ProfitDOIRefBRV
where:
BRVi – Business Reference Value of current customer reference iDOIin – Degree of Influence of current customer reference i on client customer nRefn – Degree that references impacted new client customer’s n-th purchase decisionProfitn – Profitability of new client customer nN – Total number of new client customersr – Discount rate (in months)tn – month that new client customer n became a customer
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Conceptual Model
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Client
Firm Size
Reference
Media Format
Reference
Congruency
Business Reference
Value (BRV)
Length of
Client Relationship
www.drvkumar.com© Dr. V Kumar
An Empirical Example
To understand the value and influence of business references, we provide an empirical example with two B2B firms from different industries over a 6 year time period:
1. Financial Services Firm
2. Telecommunications Firm
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Descriptive Statistics
Telecommunications Firm Financial Services Firm
# of References 88 94
Total Active Clients 5,109 5,576
% References ~1-2% ~1-2%
Converted Prospects 31 37
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High BRV = High CLV?
Referencing Firms were rank-ordered based on CLV and sorted into deciles (Telecom.)
DecileCLV
(‘000s)BRV
(‘000s)
Decile 1 30.8 34.6
Decile 2 25.7 40.8
Decile 3 20.2 49.6
Decile 4 17.3 55.8
Decile 5 14.9 61.2
Decile 6 12.1 30.2
Decile 7 9.3 6.2
Decile 8 6.4 3.1
Decile 9 3.2 1.8
Decile 10 0.8 0.2
We see that:
• Firms with a high CLV tend to have a high BRV – top 6 deciles of CLV have top 6 deciles of BRV.
• However, BRV is highest in deciles 3, 4, and 5 when ranked based on CLV.
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Segment Description
• Who are the referencing firms that have a high BRV?
Telecommunications Financial Services
Variable High BRV
n = 44
Low BRV
n = 44
High BRV
n = 47
Low BRV
n = 47
Average CLV (‘000s) 18.4 5.8 18.7 5.2
Average Tenure (Years) 10.3 4.9 14.7 6.8
Most Common Format Video Call Me Video Call Me
Average # of Employees 2,710 468 2,158 318
Average Revenue ($M) 59.4 11.2 70.6 18.8
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Implications
• Higher BRV is realized when client references have:
– Larger Client Firms
– Moderate Client Relationship Length
– Richer Reference Format
– Higher Degree of Congruency
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Can your customers be your marketers too?
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How do you measure a customer’s influence?
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Social Media Landscape
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Collaboration
Wikis, Social bookmarking Social news
Multimedia
Photo sharing, Video
sharing, Livecasting
Entertainment
Virtual World, Online gaming
Reviews
Product reviews,
User forums, Q&As
Online Interaction
Blogs, Micro-blogs,
and Social Networking
Social Media
www.drvkumar.com© Dr. V Kumar
“If you make customers unhappy in the physical world, they mighteach tell 6 friends. If you make customers unhappy on the Internet, theycan each tell 6,000 friends.”
Jeff Bezos, CEO at Amazon.com
The Power of WOM
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More than 1.44 billion
active users Worldwide
50% of users 18-24
years old go to
Facebook when
they wake up `
40 million small
business pages
300 million photos
updated per day
Facebook Calling
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Sources : https://zephoria.com/top-15-valuable-facebook-statistics/
http://expandedramblings.com/index.php/facebook-page-statistics/
293,000 status
updates per min
75% of brands promote their Facebook posts
www.drvkumar.com© Dr. V Kumar
500 million
Tweets sent
per day
328 Million Monthly
Active Users
66% of U.S. companies
use Twitter for
marketing purposes
1 billion unique
visits monthly to
sites with
embedded tweets
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Sources: https://www.dreamgrow.com/top-15-most-popular-social-networking-sites/
http://expandedramblings.com/index.php/twitter-stats-for-businesses/
74% of users
follow SMBs
to get product
updates
www.drvkumar.com© Dr. V Kumar
What the Industry has to say..
• “When you have a brand like ours that has such high awareness and knowledge, traditional brand tracking is not helpful, so things like social listening, active communities, those are better place for us to put our investments”
Seth Farbman,
Global CMO, Gap Inc
• “We are trying to institute tools from social media listening perspective to provide insights to our brands for new product opportunities”
Frank Cotignola,
Consumer insights manager of knowledge sharing and social media at Kraft’s CIS center of
Excellence
• “Are there human behavioral cues in the social conversation that allows us to determine future brand relevance, reinforcement or reinvention, or natural untapped opportunities?”
David Bradfield,
Director of marketing strategy and social experience
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How Marketers View Consumer Networks
What Consumer Networks Actually Are
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Total Customer Value
Individual Profitability
Social Profitability
Individual Profitability
Firm
Consumer
Communication Channel
Individual Profitability: Net Present Value of Future Profitability attributable to an individual’s own purchases
Social Profitability: Net Present Value of Future Profitability attributable to an individual’s Word of Mouth
www.drvkumar.com© Dr. V Kumar
Customer Influence Value (CIV)
• “The monetary gain or loss realized by a firm that is attributable to a customer (influence), through his/her spread of positive or negative WOM.”
• Accounts for • Profits due to Positive WOM
• Losses due to Negative WOM
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www.drvkumar.com© Dr. V Kumar
7 Steps to Social Media Success
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Reap the Rewards!!!
Use the candidates in a campaign to talk about ice creams
Recruit the ideal candidates who can talk about ice creams
Use these factors to locate all the ideal candidates
Identify the factors that make ideal candidates
Identify individuals who can spread the message
Monitor the conversations
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Assignment 5:In-class BRV Calculation
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