Gaining Competitive Advantage through Engagement Strategy · 2018-05-15 · Engagement Strategy ISB...

www.drvkumar.com© Dr. V Kumar

Gaining Competitive Advantage through

Engagement StrategyISB Customer Behavior & Branding PGPpro

V. Kumar, PhDRegents’ Professor,

Richard and Susan Lenny Distinguished Chair & Professor of Marketing, Executive Director, Center for Excellence in Brand & Customer Management,

and Director of the Ph.D. Program in MarketingJ. Mack Robinson College of Business, Georgia State University, Atlanta GA

andChang Jiang Scholar, HUST, Wuhan China.

Fellow, Hagler Institute for Advanced Study, TAMU, College Station, TX Senior Fellow, Indian School of Business, India

Measuring and Maximizing Customer Engagement Value (III)Day 2 – Session 6

April 22, 2018 DelhiApril 29, 2018 Hyderabad

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Conceptual Approach to Measure CEV

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• Total value provided by customers to the firms through their (a) purchase transactions with the firm, (b) ability to refer other customers to the firm, (c) power to positively influence other customers about the firm’s offerings , and (d) knowledge about the firm’s product/service offerings in providing a feedback to the firm.

Customer Engagement Value (CEV)

Customer Lifetime Value (CLV)

Net present value of future cash flows

from a customer over his/her lifetime with

the company

Customer Referral Value (CRV)

Quantifiable measure of the type, quantity,

& effectiveness of paid referrals that an individual customer provides to others

Customer Influence Value (CIV)

Monetary value of customers’ social

media influence on other acquired customers and

prospects

Customer Knowledge Value (CKV)

Value a customer adds to the firm through his/her

feedback

Firm and Competitive Actions

Customer Behavior / Attitudes / Network Metrics

Source: Kumar, V. (2013), “Profitable Customer Engagement: Concepts, Metrics & Strategies”, Sage Publications.

Customer Brand Value (CBV)


Understanding Business Reference Value

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Motivation

• Many firms are using social influence to drive adoption of products and services.

• In a B2B context, the use of client references is often the only tool seller firms have.

• It is unclear to this point the value of or extent to which client references drive new customer adoption.

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Motivation - Examples

SAS encourages customers to create “video success stories” which will be used as references for potential customers.

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Business Reference Value (BRV)

• To compute BRV, we first need a way to measure it.

• We propose that BRV is a function of 3 key components:

1. The amount of influence that business references had on a potential client firm’s adoption.

2. The amount of influence a given reference had on a potential client firm’s adoption.

3. The profitability of the potential client firm.

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BRV Measurement

N

1nt

ninni

nr)(1

ProfitDOIRefBRV

where:

BRVi – Business Reference Value of current customer reference iDOIin – Degree of Influence of current customer reference i on client customer nRefn – Degree that references impacted new client customer’s n-th purchase decisionProfitn – Profitability of new client customer nN – Total number of new client customersr – Discount rate (in months)tn – month that new client customer n became a customer

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Conceptual Model

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Client

Firm Size

Reference

Media Format

Reference

Congruency

Business Reference

Value (BRV)

Length of

Client Relationship


An Empirical Example

To understand the value and influence of business references, we provide an empirical example with two B2B firms from different industries over a 6 year time period:

1. Financial Services Firm

2. Telecommunications Firm

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Descriptive Statistics

Telecommunications Firm Financial Services Firm

# of References 88 94

Total Active Clients 5,109 5,576

% References ~1-2% ~1-2%

Converted Prospects 31 37

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High BRV = High CLV?

Referencing Firms were rank-ordered based on CLV and sorted into deciles (Telecom.)

DecileCLV

(‘000s)BRV

(‘000s)

Decile 1 30.8 34.6

Decile 2 25.7 40.8

Decile 3 20.2 49.6

Decile 4 17.3 55.8

Decile 5 14.9 61.2

Decile 6 12.1 30.2

Decile 7 9.3 6.2

Decile 8 6.4 3.1

Decile 9 3.2 1.8

Decile 10 0.8 0.2

We see that:

• Firms with a high CLV tend to have a high BRV – top 6 deciles of CLV have top 6 deciles of BRV.

• However, BRV is highest in deciles 3, 4, and 5 when ranked based on CLV.

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Segment Description

• Who are the referencing firms that have a high BRV?

Telecommunications Financial Services

Variable High BRV

n = 44

Low BRV

n = 44

High BRV

n = 47

Low BRV

n = 47

Average CLV (‘000s) 18.4 5.8 18.7 5.2

Average Tenure (Years) 10.3 4.9 14.7 6.8

Most Common Format Video Call Me Video Call Me

Average # of Employees 2,710 468 2,158 318

Average Revenue ($M) 59.4 11.2 70.6 18.8

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Implications

• Higher BRV is realized when client references have:

– Larger Client Firms

– Moderate Client Relationship Length

– Richer Reference Format

– Higher Degree of Congruency

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Can your customers be your marketers too?

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How do you measure a customer’s influence?


Social Media Landscape

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Collaboration

Wikis, Social bookmarking Social news

Multimedia

Photo sharing, Video

sharing, Livecasting

Entertainment

Virtual World, Online gaming

Reviews

Product reviews,

User forums, Q&As

Online Interaction

Blogs, Micro-blogs,

and Social Networking

Social Media


“If you make customers unhappy in the physical world, they mighteach tell 6 friends. If you make customers unhappy on the Internet, theycan each tell 6,000 friends.”

Jeff Bezos, CEO at Amazon.com

The Power of WOM

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More than 1.44 billion

active users Worldwide

50% of users 18-24

years old go to

Facebook when

they wake up `

40 million small

business pages

300 million photos

updated per day

Facebook Calling

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Sources : https://zephoria.com/top-15-valuable-facebook-statistics/

http://expandedramblings.com/index.php/facebook-page-statistics/

293,000 status

updates per min

75% of brands promote their Facebook posts


500 million

Tweets sent

per day

328 Million Monthly

Active Users

66% of U.S. companies

use Twitter for

marketing purposes

1 billion unique

visits monthly to

sites with

embedded tweets

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Sources: https://www.dreamgrow.com/top-15-most-popular-social-networking-sites/

http://expandedramblings.com/index.php/twitter-stats-for-businesses/

74% of users

follow SMBs

to get product

updates


What the Industry has to say..

• “When you have a brand like ours that has such high awareness and knowledge, traditional brand tracking is not helpful, so things like social listening, active communities, those are better place for us to put our investments”

Seth Farbman,

Global CMO, Gap Inc

• “We are trying to institute tools from social media listening perspective to provide insights to our brands for new product opportunities”

Frank Cotignola,

Consumer insights manager of knowledge sharing and social media at Kraft’s CIS center of

Excellence

• “Are there human behavioral cues in the social conversation that allows us to determine future brand relevance, reinforcement or reinvention, or natural untapped opportunities?”

David Bradfield,

Director of marketing strategy and social experience

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How Marketers View Consumer Networks

What Consumer Networks Actually Are

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Total Customer Value

Individual Profitability

Social Profitability

Individual Profitability

Firm

Consumer

Communication Channel

Individual Profitability: Net Present Value of Future Profitability attributable to an individual’s own purchases

Social Profitability: Net Present Value of Future Profitability attributable to an individual’s Word of Mouth


Customer Influence Value (CIV)

• “The monetary gain or loss realized by a firm that is attributable to a customer (influence), through his/her spread of positive or negative WOM.”

• Accounts for • Profits due to Positive WOM

• Losses due to Negative WOM

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7 Steps to Social Media Success

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Reap the Rewards!!!

Use the candidates in a campaign to talk about ice creams

Recruit the ideal candidates who can talk about ice creams

Use these factors to locate all the ideal candidates

Identify the factors that make ideal candidates

Identify individuals who can spread the message

Monitor the conversations


Assignment 5:In-class BRV Calculation

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Gaining Competitive Advantage through Engagement Strategy · 2018-05-15 · Engagement Strategy ISB...

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