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• Chapters 22 – 29 • Customer LTV &
Equity• Netflix Case• Guest Stuart Paap
Today’s Class
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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
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 styleLessons Learned
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 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 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 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