HS285: Marketing ManagementClass Ten

June 27, 2013

Beth Goldstein

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• Chapters 22 – 29 • Customer LTV &

Equity• Netflix Case• Guest Stuart Paap

Today’s Class

Click to edit Master title styleThanks to the following teams

Volunteers to present on MondayEmerging LeadersHuddle CareMusic AwesomenessVshare

Meet me in class by 8:45 Mon so I can load PPTAll others – please load PPT to Latte before midnight Monday and upload written plan by 9 am Tuesday morning

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Click to edit Master title styleFailure Rate of NPOs

Alas, I am not aware of any data on the question you pose. However, based on anecdotal evidence of the never ending growth of the sector even during the Great Recession, I think of a tweak of the famous words of General MacArthur, "Old charities never die, they just malinger on indefinitely"!

Ken Berger, President. Charity Navigator

Click to edit Master title styleFailure Rate of NPOs

As you know, given the complexity involved in determining these sorts of stats for small businesses, this is a big, complex question.  You can find stats around revocations, failure to thrive, but a huge challenge is trying to capture and define the entire “nonprofit market.” 

Timothy Regele, The Boston Foundation

Click to edit Master title styleWhen Customer Equity Matters

Short term marketing tactics can negatively impact lifetime valueEQUITY Measures

Customer acquisitionCustomer retentionCross/upselling opportunities

Click to edit Master title styleWachovia

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Not all advertising media is the sameCustomer behavior varies by regionCustomer relationships should be the focus of valuation measuresInteractive media is important but does not displace traditionalTHIS IS HARD!!!!!

Lifetime Value

No.Cust

Avg Sales

Frequencyper yr

Gross Revenue

Growth

Current 100 $2000 2 $400,000

10% 110 $2200 2.2 $532,400 33%

15% 115 $2300 2.3 $608,350 52%

20% 120 $2400 2.4 $691,200 73%

No.Cust

Avg Sales

Frequencyper yr

Gross Revenue

Growth

Current 100 $2000 2 $400,000

10% 110 $2200 2.2 $532,400 33%

15% 115 $2300 2.3 $608,350 52%

20% 120 $2400 2.4 $691,200 73%

Lifetime Value

No.Cust

Avg Sales

Frequencyper yr

Gross Revenue

Growth

Current 100 $2000 2 $400,000

10% 110 $2200 2.2 $532,400 33%

15% 115 $2300 2.3 $608,350 52%

20% 120 $2400 2.4 $691,200 73%

Lifetime Value

No.Cust/

Donors

Avg Sales/

Donations

Frequencyper yr

Gross Revenue/Funding

Growth

Current 100 $2000 2 $400,000

10% 110 $2200 2.2 $532,400 33%

15% 115 $2300 2.3 $608,350 52%

20% 120 $2400 2.4 $691,200 73%

Lifetime Value

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Total Revenue Individual Generates

+Revenue their Referred Business generates

-Acquisition & Maintenance Costs

Customer Lifetime Value

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Total Revenue Donor Provides

+Revenue their Donation/Support generates

-Acquisition & Maintenance Costs

LTV for Non Profits Means REDEFINING Your Customer

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Which tools you use to acquire which customers or donorsHow much you spendWhich customers/donors to fire/avoidMeasurement tools and skills required

Implications to your Success

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• H: Customer/Donor Lifetime Value_________________________?????

• I: Investment/Amount required to attract and retain customer/donor

(Marketing + Customer service cost)_________________________????

How Often Is I > H?

Customer Lifetime Value 14.1

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• What can you do to increase the individual value of a donor or customer?Which customers ordonors will you boot?

Customer Lifetime Value 14.1

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A: Amount customer spends or donates

H: Customer Lifetime Value

What does the GAP between A and H mean?

Where is the value generated????

Customer Lifetime Value 14.1

Click to edit Master title styleHow Many Use Netflix?

Click to edit Master title styleBrand Perception/Value: DVD vs Streaming

Click to edit Master title styleNetflix: Who are they?

Click to edit Master title styleNetflix

They evolved with the needs of their audience.

What caused them to make a change at every shift?

Click to edit Master title styleNetflix – Evolution

At launch – content to early adopters of DVD players Web portal for movie lovers

THEN…………..

Click to edit Master title styleNetflix – Evolution

DVD Rental by mail – alternative to traditional video rental stores (Blockbuster)

THEN…………..

Click to edit Master title styleNetflix – Evolution

Lowered price to be ’all you can watch’ service provider

THEN…………..

Click to edit Master title styleNetflix – Evolution

Developed proprietary recommendation system

THEN…………..

Click to edit Master title styleNetflix – Evolution

Rapid expansion of regional distribution center providing overnight service via US Postal Service

THEN…………..

Click to edit Master title styleNetflix – Evolution

Became a distribution channel for less-known and Indie films; launched Red Envelope Entertainment

THEN…………..

Click to edit Master title styleNetflix – Evolution

Made it easier for customers to leave and return

THEN…………..

Click to edit Master title styleNetflix – Evolution

Video on Demand Options: 20071. License recommendation system to cable

providers (partner with the enemy)2. Stream online video for free3. Become a stand-alone online video business

Separate profit centers for video and online

Click to edit Master title styleBlockbuster

“Online rental services are serving a niche market”

Sept 2010 – filed for bankruptcy (>25K employees at the time)

Failure to adapt and evolve

Click to edit Master title styleSplit in Two – Raising prices ‘11

Click to edit Master title style60% Price Hike Reaction

>12,000 people left comments on Netflix's blog postSocial media flooded with complaintsEvery major media outlet covered the story

That’s a $6 price increase – REALLY!!!

Click to edit Master title styleBlockbuster seizes the opportunity

Offered Netflix customers a free 30- day trial and a discounted subscription plan. At Blockbuster.com "Looking to make the switch to Blockbuster? Tell Netflix why,"

option to post publicly #HelloBlockbuster”

Click to edit Master title styleVudu (Walmart’s Streaming Svc)

Click to edit Master title styleNetflix Price Increase Debacle – 9/11

Click to edit Master title styleFinal Thought – by the Numbers

Streaming: 36.3 million (3/13) (up 3 million in Qtr 1 ‘13 alone)DVD: 8 million (down 241,000)

Hulu: 4 million paid as of 4/13 (Disney and News Corp. own them)Amazon Prime:10 million as of 3/13Redbox: 36K locations/43K Kiosks

Click to edit Master title styleMarketing Director Interviews

Lessons Learned

Click to edit Master title styleNext Class Assignment: July 1

We will discuss your:Marketing BudgetManaging Overhead costs for non-profits

Fun with Marketing Activity:The Good, the Bad, the UGLY!!

Presentations – 4 businesses