Customer Decision

Every marketing driven business faces a classic tradeoff between harnessing value from New Users vis-a-vis that from New Uses or Usages. The firm's focus shifts in phases, but creating an incremental customer base is always a more cost and time intensive exercise than deriving incremental value from existing customers by fulfilling their new related or unrelated needs or increasing current consumption levels (Up-sell). Regular response models deployed to ascertain the response rates and next likely products at customer segment level is not enough to obtain the Maximum Value Threshold (MVT) of the portfolio. Most response models operate at meager 20 to 30 per cent of MVT, when there are analytical methods to enhance performance. A suitable CRM based business intelligence application is required to analyze the customer's recent or past history and to deploy real time behavioral models. Such models not only recommend appropriate reward mechanism or tier movement for the customers but also track loyalty indices over time and integrate with Customer Lifetime Value (CLTV) measure or Cross sell / Upsell framework. However, the best Loyalty models merge these findings with the primary research surveys and Household panels to not only support model outputs but also to enable root cause detection for Loyalty swings. In recent years, more and more companies have adopted relationship marketing (RM). At the core of RM is the development and maintenance of long-term relationships with valuable customers. In RM, the customer lifetime value (CTLV) is the discounted profit streams of a customer across the entire customer life cycle. The CLTV plays a key role in customer acquisition and retention decisions. When using the CLTV paradigm, companies can make consistent decisions over time about which customers and prospects to acquire and retain, as well as those not to acquire and retain, and also determine the level of resources to be spent on the various micro-segments. It has been found that selecting and nurturing customers based on the CLTV approach increases future profitability of the customers.