| Understand measures used by MLM marketers | | | | profitability: |
| and corporate marketers for measuring value to | | | | There were four types of customers when |
| the organization of its customer segments | | | | considering both loyalty & profitability: |
| satisfaction, profitability, loyalty, retention, | | | | 1. True friends - the most profitable group were |
| complaints, other customer segment measures. | | | | loyal in both "thought & deed", that is, they |
| The Value Proposition is: the whole cluster of | | | | referred others to the brand, bought often, |
| benefits the company promises to deliver-the | | | | & were profitable. These "true friends" should |
| promise about the problem solution offered by | | | | receive attention to "delight, nurture, defend, |
| the company. The Value Proposition includes all | | | | & retain them". |
| the experiences the customer will have on the | | | | 2. Butterflies - were potentially profitable, but |
| way to obtaining & using the offering. | | | | were infrequent buyers who showed little loyalty |
| They are guides to behavior within the company. | | | | to the brand. |
| Marketing strategies, tactics, programs, & | | | | 3. Barnacles - were frequent buyers, but at low |
| campaigns should support & reinforce the | | | | volumes of purchase, & were loyal but high |
| value proposition. | | | | cost to serve. |
| Customer Relationship Management (CRM) is: | | | | 4. Strangers - frequent buyers, who were |
| process of managing detailed info about individual | | | | unprofitable because they only bought products |
| customers & carefully managing all customer | | | | services that were steeply discounted, returned |
| touch points" to maximize customer loyalty | | | | products often, and, in general behaved in such a |
| & profitability. | | | | way that management should make it difficult for |
| CRM focuses on meeting the individual needs for | | | | these buyers to want to buy from the company. |
| valued customers. The skill requires:o Building a | | | | The key takeaway about relationships between |
| customer data base or list with info about | | | | loyalty & profitability: data mining is required |
| behavior & preferenceso Data mining to | | | | to explore the recency, frequency, & |
| detect trends, segments, & individual needso | | | | profitability of customer relationships & then |
| Acting on the knowledge gained from the data | | | | be able to take management actions to grow |
| base & data mining | | | | "best friends" & focus on appropriate levels |
| One popular CRM methodology is the "One to | | | | of support for the "butterflies", & "barnacles". |
| One" CRM model developed by Don Peppers | | | | Finally, you should identify how best to minimize |
| & Martha Rogers, 1st shown in their 1993 | | | | unprofitable interactions with "strangers". This is |
| book The One to One Future. | | | | important in building your MLM business or any |
| 1 to 1 CRM requires an organization to do four | | | | online business for that matter. |
| activities very well:o Identify prospects & | | | | The single question that identified the loyal & |
| customers by name & by needso | | | | profitable customers was: "How likely is it that |
| Differentiate the identified prospects & | | | | you would recommend (company X) to a friend |
| customers by needs & differential value to | | | | or colleague?" On a 10 point scale, an answer of 9 |
| the organizationo Interact with customers to | | | | or 10 was labeled as "Promoters", 7 or 8 was |
| improve learning about individual needs & to | | | | "Passively Satisfied" and 6 or lower was |
| build stronger relationshipso Customize offerings | | | | "Detractors". The important number is the "Net |
| & communications to each customer in each | | | | Promoters" defined as the percentage of |
| identified customer group | | | | customers who are "Promoters" minus the |
| Customer Lifetime Value (CLV) is: the net present | | | | percentage of customers who are "Detractors". |
| value of contribution margin of revenue streams | | | | The key to developing profitable growth is to |
| from a customer from direct purchases & | | | | grow the "net promoters" number. |
| revenues from referrals who also buy minus the | | | | The key takeaway: ...to grow the net promoters |
| cost to acquire the customer relationship. | | | | number you must identify customers who are |
| CLV can be computed with accuracy if the | | | | "Passively Satisfied" or "Detractors" & take |
| company has an Activity Based Costing system | | | | specific actions to "convert" them to "Promoters". |
| (ABC accounting) that allows variable costs of | | | | Every company loses some of it s customers |
| serving each customer to be determined. If there | | | | each year, often for reasons that are beyond the |
| is no ABC accounting system, then estimated | | | | control of the company (customer moves, goes |
| costs can be used for the costs to serve. Costs | | | | out of business, no longer needs the product |
| to serve are variable costs for the transactions | | | | offering, & the like). |
| with the customer. | | | | To manage the cost of lost customers:o identify |
| Customers with high CLV should receive benefits | | | | all customers who left, using company internal |
| that bond the customer more closely with the | | | | records to find out who left,o how profitable they |
| company. Benefits could include loyalty rewards to | | | | were to the company,o why they left,o where |
| further increase the life of the relationship and the | | | | they went. Such internal measures are often |
| value of the CLV. CLV measures also help | | | | augmented by follow up research with the former |
| determine actions to either increase the value of | | | | customerso benchmark best practices in |
| low value customers or to discontinue relationships | | | | customer retention in the industry & in similar |
| with low CLV customers. There is a danger in | | | | industries |
| "firing" customers. Therefore, associating a cost | | | | The key takeaway from lost customer analysis in |
| to each customer will make your decision for | | | | MLM is to focus on actions for improving retention |
| downline investment much easier. | | | | of profitable customers. These measures should |
| Customer loyalty may not correlate positively | | | | focus on identifying reasons for leaving that you |
| with CLV. Several studies have investigated the | | | | could have prevented by better management. |
| relationship between loyalty, satisfaction & | | | | |