4. Calculating Customer Lifetime Value
Where GC is yearly gross contribution per customer, M is the (relevant)
retention costs per customer per year, n is the horizon (in years), r is the
yearly retention rate, d is the yearly discount rate.
5. Calculating Simplified
Customer Lifetime Value – (No
really!)
Where GC is yearly gross contribution per customer, r is the yearly
retention rate, d is the yearly discount rate.
6. Calculating Simplified Customer
Lifetime Value – Example
Example: If the gross contribution (profit) of a customer is $500 per
year, your retention rate is 95 percent, assume a discount rate of 2 percent
(using interest rate as a proxy), this would yield a CLV of $6,786.
So what and who cares?
10. Why this matters!
“An increase in NPS of 5% increases profits by
25 to 95%.”
Fred Reichheld
Loyalty Rules!
11. Getting Customers on The Grid
• Customer name
• Lifetime Revenue
• Net Promoter Score
• Customer Likeability Score (or other index)
12. Customer Likeability Score (CLS)
1. Disagree strongly
2. Disagree
3. Disagree somewhat
4. Agree somewhat
5. Agree
6. Agree strongly
On a scale of 1-6, please rate your level of agreement with the following statement:
This customer is clearly a joy to work with.
13. The Grid
C B A
F E D
Net Promoter Score
Neutrals (7-8) Promoters (9-10)Detractors (0-6)
CustomerLikabilityScore
DislikeLike
14.
15. Customers On The Grid
0
2
4
6
0 2 4 6 8 10
C B A
F E D
Net Promoter Score
Neutrals PromotersDetractors
CustomerLikabilityScore
DislikeLike
16. For more on the Sage Customer Loyalty
Program visit:
http://www.sagepartnermarketing.com
Navigate to: Partner Programs >> Partner Advantage >> Customer Loyalty Program
17. Value Gap
• Basic
– Customer name
– Revenue from the customer per some discrete period
– Value provided to the customer in that same period
• Advanced
– Customer name
– Value that could be provided over a future discrete period
– Possible acceptable price (revenue) for that provided value