PROFITABLE
CUSTOMER ENGAGEMENT
Concepts, Metrics & Strategies
V. Kumar
© Dr V.Kumar
Chapter 9
Managing Customers in a Multi-Dimensional
World
Instructor’s Presentation Slides
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Introduction
 Profitably managing customers is a multidimensional task
 Several key CEV elements need to be managed
simultaneously
 Firms might face organizational or database problems
while trying to manage several CEV elements
 Firms will have to prioritize which CEV metrics they use
for managing customer profitably
 Firms will have to start collecting individual level data for
calculating several CEV metrics
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Implementing the CEV Framework
Define firm
objectives
Align objectives
with CEV
metrics
Decide which
CEV metric you
want to
prioritize
Decide which
metric can be
measured with
your data
Begin building
your data
towards the CEV
metrics for
future analysis
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Managing the CEV framework
 Customer Brand Value (CBV), Customer Lifetime Value
(CLV), Customer Influence Value (CIV), Customer Referral
Value (CRV), Customer Knowledge Value (CKV) are
interrelated
 Firms need to prioritize the management of these
metrics
 The choice of metric for a business has everything to do
with the type of business implementing the framework
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Customer Brand Value
 A strong brand is the core of any customer engagement
 Brands need to be seen as viable, before customers can
work their way through CBV framework
 The CBV metric is closely related to the CLV metric
 Once brand advocacy and premium brand behavior is
optimized, CLV can be maximized
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Customer Lifetime Value
 Once a strong brand is build, firm should focus on managing CLV
as it directly contributes to profits
 In order to calculate CLV, customer transaction level data is needed
 Statistical modeling will aid marketers in optimally allocating
resources across customer segments
 Wheel of fortune strategies can be used to maximize CLV
 CLV is not the only factor that can determine a customer’s
profitability
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Customer Referral Value
 Current customers indirectly contribute to the profits of the firm by
referring new customers to the firm
 Customers act like non-employee salesperson who are compensated
for contributing towards the firms profits
 A firm can maximize CRV by identifying the right customer who
can refer profitable customers
 CRV is used in the B2C setting while BRV is used in the B2B
setting
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Customer Influence Value
 A firm can attempt to capitalize on CIV only if its customers are
present on social media platforms
 Influencers need not be famous spokespersons; they can be
individuals with a broad social media network and considerable
clout
 By choosing the right influencer and by offering the right tangible
and intangible benefits, companies can try and maximize CIV
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Customer Knowledge Value
 CKV focuses on capitalizing on information customers provide to
the firm, in order to improve customer satisfaction and thereby
increase buying behavior
 By encouraging customer feedback, firms increase the number of
customer interactions which will lead to higher profits
 Having a streamlined process and system to manage customer
feedback helps firms in keeping customers happy and loyal
 CKV can be maximized when firm makes communication with
customers easy, provides them with incentives to give feedback and
encourage customers to collaborate with the firm
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Note on managing the framework
 CLV is a crucial metric to any organization which wants to
understand the true value of its customers
 However of the indirect CEV concepts, CRV can be easily
quantifiable and can easily be maximized
 Tracking CIV would be more difficult than tracking CRV as
software to track social media needs to be in place
 CKV is the most difficult to maximize, especially if a firm does not
have a streamlined process of tracking and managing customer
feedback.
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© Dr V.Kumar
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Organizational Challenges
CMO/CEO
Knowledge manager
• Analyzes summarized
customer reports according
to “3P” approach
• Summarizes analysis and
potential strategies in new
report for upper
management
• Chooses appropriate
projects and allocate
projects accordingly
• Also decides how
involved customers will be
in new product
development
process
“Who Does What”
Project managers
• Develop new products and
involve customers in process
according to upper
management guidelines
• Launch product
When integrating
customer feedback into
the new product and
service development
process
Knowledge team
• Gathers customer insights
and summarizes in reports
• Implements strategies to
encourage customer
feedback
New product/service
Customers
• Provide feedback to the firm
about existing products and
ideas for new products via
social media
• Launch product
• Let customers know their
input helped create a new
product
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Database Management
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Database Management
 To implement CEV framework, firms need to store historical data.
Data availability is essential to implement CEV framework
 Exponential growth in need to store big data has significant impact
on database management
 Key issues regarding database management are:
(i) data integrity
(ii) data accessibility
(iii) data security
(iv) disaster recovery
(v) change management
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Database Management
 Data Integrity – ensures that the data is of high quality, consistent
and accessible.
 Threat to data integrity can be minimized by





Backing up data regularly and storing in an alternate location
Controlling access to data through read/write privileges
Designing user interfaces that prevent input of invalid data
Using error detection and correction while transmitting data
By encrypting data
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Database Management
 Data Accessibility - is an increasingly important data quality
dimension for firms.
 Data accessibility ensures users can read/ update for business processes
 As data becomes more accessible, there is a need to maintain data that is
understandable and documented
 Data Security - address the issues of data loss and theft
 Data security can be achieved by restricting user access to data through user
profiles
 Encryption is another way to protect data
 Security risks can be minimized by using security software
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Database Management
 Disaster Recovery - involves the steps taken to recover data upon
the occurrence of a breach or compromise
 Data needs to be covered with an insurance policy
 Disaster recovery measures needs to be in place. Disaster recovery measures
can be classified into three groups
 Preventive measures
 Detective measures
 Corrective measures
 Change Management - is the process of determining which
changes need to be made to a database, evaluating the effects of
those changes, and then implementing the changes.
 Change management is an necessary evil in maintaining the integrity and
accessibility of a company’s data
 Growing company needs would call for changes in database. Managing all
these changes well would impact the IT related costs
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Future of Customer Engagement
 Big Data – can be sourced from many channels – RFID, sensors,
geolocation, audio visual streaming and through social media
 It covers many type of data like demographics, transactional
 Understanding and categorizing big data is relatively new
 High Velocity – The speed with which big data is collected is high.
Information is collected at a rate like never before
 High Volume – Big data has been defined as data sets that are too large
to be analyzed by traditional software. Actual sizes could vary from
terabytes to exabytes
 High Variety – Big data comes from countless unique sources and has
many dimensions
 Analyzing big data would require advanced software. Managers have to
decide when their companies would be ready to mine Big data
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© Dr V.Kumar
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Future of Customer Engagement
Type of Data
Transactional Data
- Profit
- Time of Purchase
- Frequency
Marketing
Data
- Emails
- Direct mails
- Promotions
Demographics
- Age
- Income
- Employment
Customer Level
Services Marketing Metrics
Customer
Engagement Value
- CLV
- CRV/BRV
- CKV
- CIV
- CBV
Expected
Share of Wallet
Expected Churn Rate
Attitude
- Digital data
- Neurophysiological
data
Firm Data
- Organizational
Investments
- Marketing Spending
- Market Share
Firm Level
Services Marketing Metrics
Expected Service Failure
and Recovery rates
HR/ Employee
Engagement metric
Operational metric
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www.drvkumar.com
Future of Customer Engagement
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www.drvkumar.com
Future of Customer Engagement
 SoLoMo – Convergence of social media, location based services
and mobile based services
 SoLoMo changes the way marketers engage with customers
 Location details help social media players to personalize
recommendations
 SoLoMo provides marketers the ability to pinpoint customers
location and sent relevant offers
 As these technologies become more refined, CLV, CIV, CRV
metrics can be maximized based on data gathered from SoLoMo
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End of Chapter 9
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© Dr V.Kumar
www.drvkumar.com