Question

For 125 years, the Wall Street Journal (WSJ) has been a venerated newspaper with a focus on global business. It was a pioneer in developing a pay wall for its digital content in 1997. From 2010 to 2015, however, WSJ began to lag behind other newspapers (e.g., Financial Times, USA Today). In 2015, WSJ undertook a complete redesign of its website and mobile apps across multiple platforms. In 2008, 10% of WSJ’s traffic came via mobile devices. That figure sits at 55% in 2016 and continues to grow quickly. WSJ has about 900,000 digital-only subscribers, trailing the New York Times (1 million) and coming in ahead of the Financial Times (over 520,000).

a) Demonstrate the customer lifetime value (CLV) concept . Thinking about WSJ, how could it use the concept of CLV to increase the overall profitability of its customer base?

b) Discuss the importance of distinguishing between customer acquisition and retention when developing marketing strategies.

Answer 1

Answer (a)

Step 1

What is Customer Lifetime Value (CLV)? How could it use the concept of CLV to increase the overall profitability of its customer base

The lifetime value of a customer, or customer lifetime value (CLV), represents the total amount of money a customer is expected to spend in your business, or on your products, during their lifetime. This is an important figure to know because it helps you make decisions about how much money to invest in acquiring new customers and retaining existing ones.

For example, the CLV of a Honda owner might be as much as $100,000 if they are happy with their car or minivan choice and end up buying several through the years. Or the CLV of a regular coffee drinker might be even higher than that, depending on how many cups of coffee they drink a day and where they buy it. Conversely, someone who buys a home twice in their life might only be worth, say, $15,000 to a real estate agent, because while the value of the purchase is huge, the percentage paid to an agent is only a fraction of that.

In the big picture, CLV is a gauge of the profit associated with a particular customer relationship, which should guide how much you are willing to invest to maintain that relationship. That is, if you estimate one customer’s CLV to be $500, you wouldn’t spend more than that to try and keep the relationship. It just wouldn’t be profitable for you.

Step 2

Calculating CLV

The simplest way to calculate CLV is:

CLV = average value of a purchase X number of times the customer will buy each year X average length of the customer relationship (in years)

So a marathon runner who regularly buys shoes from your shoe store might be worth:

$100 per pair of shoes X 4 pairs per year X 8 years = $100x4x8=$3,200

And the mom of a toddler might be worth:

$20 per pair X 5 pairs per year X 3 years = $20x5x3 = $300

So who should you be paying more attention to? Clearly, the adult runners in your database.

Step 3

The Value of Knowing Your CLV

Calculating the CLV for different customers helps in a number of ways, mainly regarding business decision-making. Knowing your CLV you can determine, among other things:

1. How much you can spend to acquire a similar customer and still have a profitable relationship
2. What kinds of products customers with the highest CLV want
3. Which products have the highest profitability
4. Who your most profitable types of clients are

Together, these types of decisions can significantly boost your business’ profitability.

Step 4

Boosting Lifetime Value
Since the odds of selling to a current customer is 60-70%, according to eConsultancy, and the odds of selling to a new customer are 5-20%, investing your resources in selling more to your existing customer base is the key. So what tactics will increase the likelihood of a customer buying more from you? Here are some proven techniques:

1.Make it easy for customers to return items they’ve purchased from you. Making it hard or expensive will significantly reduce the odds of them making another purchase.
2. Set expectations regarding delivery dates, aiming to underpromise and overdeliver. It’s much better to promise delivery by August 1 and have it in their hands by July 20th than the reverse.
3. Create a rewards program to encourage repeat purchases, with rewards that are both attainable and desirable.
Offer freebies for doing business with you, to build brand loyalty.
4. Use upsells to increase the average value of a customer transaction, which is the equivalent of McDonald’s asking, “Do you want fries with that?”
5. Stay in touch. Long-time customers want to know you haven’t forgotten them. Make it easy for them to reach out to you as well.
.

You’ll build a more profitable, successful business by focusing on attracting and retaining long-term customers who will become advocates for you, as well as repeat buyers.

Step 5

Thinking about WSJ, the following Strategies applied to increase the overall profitability of its customer base using the concept of CLV

There are three key strategies your business can use to increase customer lifetime value (CLV). If you don’t pursue one or more of these strategies, it’s unlikely that you’ll see a big uptick in customer retention or customer loyalty toward your brand anytime soon.

1.Increase sales per order: The first strategy to increase customer lifetime value is to increase sales per order. Your goal is to motivate customers to spend more money on every transaction.

2.Increase sales over time: The second strategy to boost CLV is to increase the number of sales your business closes over time. While the first strategy focuses on the value of each individual transaction, this strategy focuses on the quantity of transactions.

3.Reduce costs to serve customers: The third strategy to increase CLV is to reduce your business’ costs to serve customers overall. This includes all costs from packaging products for shipping to answering customer service calls. The lower your costs to serve customers are, the greater the value of each customer to your bottom line.

Tactics to implement your strategies.
Once you have your strategies to increase customer lifetime value, you need to identify the tactics to implement those strategies. How will you turn your strategies into action?

Fortunately, there are many options available to you. Any steps you take to improve the customer experience should improve CLV. Here are five tactics to help get you started:

1. Communication.
To increase sales over time and build customer lifetime value, you must communicate with your customers on an ongoing basis. The secret to building a powerful brand is developing a relationship with customers that leads to brand loyalty and brand advocacy over time. That starts with consistently delivering on your brand promise, meeting customer expectations for your brand, and communicating with them to build brand trust.

Email marketing is an excellent tool for communication that leads to increased CLV. Send campaigns on customers’ birthdays and anniversaries with special discounts. Don’t be afraid to get creative. You can also leverage the reach of social media to communicate with customers. For example, feature fans in user-generated content contests on your Facebook page, and share useful, meaningful information.

Customer service is an essential part of communication. If your customer service communications are poor, you’ll have a very hard time increasing CLV. Make sure customers have a variety of customer service options, including chat, email, and phone. Furthermore, make sure your customer service team is available during extended hours. We live in a 24/7 world, and offering customer service only during regular business hours is rarely enough to keep customers satisfied.

2. Personalization.
Personalized content and offers are critical to building customer lifetime value. Today, marketers have access to so much data that it’s much easier to offer personalized product offers, promotions, and more to specific customers or customer segments.

Leverage dynamic content on your website and in your email marketing, so customers always see the most relevant offers to them. For example, show related products that customers might be interested in when they view specific products on your website or when they add certain products to their online shopping carts. This is a great way to increase sales per order!

3. Exclusivity.
It’s important to recognize and reward your customers by creating exclusive offers and programs for them, particularly for your most loyal customers. Create frequent shopper programs and other loyalty perks that make your best customers feel special.

Furthermore, make sure it’s extremely easy for customers to make repeat purchases from your business. For example, ensure your ecommerce store offers easy password and username retrieval, and offer to save shipping and payment information in customers’ accounts so repeat customers don’t have to type that information all over again. Every step that you can remove in the purchase process will increase sales.

4. Details.
Details matter a lot. Even though customers have purchased products or services from your business in the past and may have been satisfied with those experiences, you can’t cut corners on future communications or transactions. Remember, user experience is critical to building customer loyalty and increasing retention and CLV.

With that in mind, go the extra mile to get the details right. For example, when you ship products to consumers, do you just toss them into a box or do you take some extra time to make sure the presentation a customer sees when they open the box is in line with your brand reputation and brand promise? Something as simple as packaging could create a wow moment that adds to customer lifetime value.

5. Re-engagement.
What do you do to re-engage prior customers who haven’t purchased anything from your business or opened one of your email messages recently? You can’t expect them to become repeat customers if you’re not trying to re-engage them. You can do this through email remarketing. Send messages to customers who haven’t purchased anything from you in three months or who haven’t opened your email newsletter or promotional emails in six months. Offer them something special to come back and buy again.Re-engagement should happen in real-time, too. Send emails to shoppers that abandon their online shopping carts. Retarget ads to people who visited specific pages on your website but didn’t buy. Both are tactics to increase sales from new and prior customers. Don’t let them get away! Instead, re-engage them with your brand and remind them of what they’re missing when they don’t buy.

Step 6

Conclusion

ncreasing customer lifetime value is dependent on your ability to develop both long-term strategies and short-term tactics to implement those strategies. Test these tactics immediately to boost your CLV. Remember, few companies invest enough in customer retention. That means your competitors probably aren’t investing adequately in CLV tactics, either. In other words, prioritizing customer loyalty and retention gives you another way to get a jump on the competition.

Answer (b)

Why is it important for the marketer to distinguish between customer acquisition, conversion, and retention when developing marketing strategies

Step 1- Introduction

Some people may not understand why marketers offer free products and coupons. It is very important for marketers to distinguish between these three concepts when it comes to acquiring and retaining customers. Without knowing the difference, marketers can make errors that will lead to customers going elsewhere.

Step 2-Customer Acquisition, Conversion, and Retention

Acquisition is when a company attracts the attention of the customer, but the customer is not yet committed. During this step, the marketers need to build their brand or product awareness to the potential consumers. For example, marketers can provide free products and allow customers create their own discount card for free.In this step, the marketers need to grab customers attention even though the customers won’t pay anything.

For instance, Netflix lets you use their services for free the first month. This is their way of acquiring customers. If the customers like the service, they will then subscribe to Netflix and start paying for it.

Conversion is when the company effectively gets the potential customer to become a regular customer. For example, Tide often promotes their brands by giving out coupons. After the customer uses the coupons (acquisition), they may decide to stick with the Tide brand and continue making their purchases accordingly. A converted customer is usually confirmed after three purchases

For example, Apple often promotes their brands by giving out coupons. After the customer uses the coupons (acquisition), they may decide to stick with the brand and continue making their purchases accordingly. A converted customer is usually confirmed after three purchases,

Retention is the company’s ability to keep their customers. Adding more value for their customers ensures that these people keep coming back. Sears uses the Shop Your Way Rewards program for loyal customers. They earn points on purchases and can later redeem those points on purchases. This program ensures customer retention.

.For example,American express membership reward are worth 0.5 cents to 1 cent each, depending on how you redeem them. If you prefer to cash in elsewhere, you can also transfer points to several loyalty program — 16 airlines and four hotel chains — sometimes at a 1:1 ratio.

Step 3-Conclusion

It is important for marketers to distinguish between these three when developing internet marketing strategies because it will give them insight as to what exactly their strategy should be. Should they try to attract new customers with their ad? Or should they make the deal a little sweeter for repeat customers? How about both? Distinguishing between these three stages helps the marketer realize the potential each ad may have on each respective group. When Sears developed the Shop Your Way Rewards program, it was initially to keep their customers coming back. Since then, it has also helped the company acquire new customers as well. Therefore, this particular strategy worked for all three of these stages.

In general speaking, marketers and customers both can get benefits through those market strategies.Marketing strategies may need to be tailored to each part of the process. Meaning that there ought to be advertisements to attract new customers, entice newly acquired customers, and retain the loyal customers who have been with the brand for years. It is important for marketers to distinguish between these three when developing internet marketing strategies because it will give them insight as to what exactly their strategy should be. Marketers should try to attract new customers with their advertisement when they are in acquisition step.They may need to make the deal a little sweeter for repeat customers in retention step. Distinguishing between these three stages helps the marketer realize the potential each ad may have on each respective group. When Sears developed the Shop Your Way Rewards program, it was initially to keep their customers coming back. Since then, it has also helped the company acquire new customers as well. Therefore, this particular strategy worked for all three of these stages.