Why Should Your Business Calculate Customer Lifetime Value?

Customer delight, customer satisfaction, user experience, and customer relationship have been the focus of every marketer in this new age. But why are marketers so obsessed with those terms instead of capturing new customers? For starters, it is predicted that it is many times more expensive to get a new customer than to retain the existing ones. Then, there is also the fact that these customers do not generate revenues for one purchase. They generate revenues over their lifetime as long as they are with the brand. Calculate a $20 revenue every month for 20 years, and the figure suddenly looks gigantic. However, calculating customer lifetime value is not an easy task as it all depends on factors such as expected churn rate, discounted rate, and profit margin per customer. Many organizations still go through the pain of making all such calculations to estimate customer lifetime value (CLV). So why is calculating customer lifetime value so important?

Generate ROI on customer acquisition

Calculating customer lifetime value gives you insights on your most profitable customers. It helps companies redirect their marketing budgets to channels, which boost the lifetime value of a customer rather than gross profit on the initial purchase. As a result, companies are looking to maximize customer value against the cost of acquiring them. Focusing on CLV will dynamically change the economics of an acquisition strategy. It frees up the budget from acquiring unprofitable customers, which can be used to acquire profitable long-term customers.

Create effective messages and targeting

A thorough CLV analysis paves way for effective customer segmentation. Segmenting customers based on customer lifetime value can increase the relevance of your marketing communications, which, in turn, brings about a higher degree of personalization. Also, a company can gain insights into what category of product each particular segment of customers prefers.

Define business objectives and metrics

Calculating customer lifetime value is very important to create a benchmark for future growth and expansion. It is also an excellent metric to determine the worth of your business. It can, therefore, help businesses define growth, turnover, future sales, and net profit. Additionally, the CLV computations can be tweaked to figure out lifetime gross margins and costs based on the average order value. Also, other KPIs such as acquisition cost, growth in average shopper value, churn rate and repeat purchase growth can be balanced with CLV computation.

Enhance retention marketing strategy

Evaluating the causes of a marketing campaign is a pretty dicey thing. Mostly marketers commit the mistake of factoring in the instant revenue of a marketing campaign to calculate ROI of the campaign. However, it does not value the subsequent revenues bought by the customer along the way. One good way to assess marketing campaigns is the impact it made on the average CLV of the customer segment you were targeting. Consequently, it aligns the marketing department focus to improve customer retention.

Cross-selling and up-selling opportunities

CLV calculation provides a business with deeper insights into customer behavior. Based on the individual pattern of buying, businesses can accurately cross-sell and up-sell the right product to the right customer. Such opportunities directly increase the revenue base of the company.

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The Perks of Being Loyal – Why Loyalty Management Programs?

Customers like options, they like experimenting, and they seek innovation. At a time when consumers’ preferences are dynamically changing with customers ready to experience new brands, the marketing effort of businesses is getting challenging. Each brand and product has their own point of differentiation and personna. It is up to the marketing manager to cater to an audience who closely aligns with the brand personna in a bid to build brand loyalty. Customer loyalty is a rare quality today. However, it is essential to invest in loyalty management programs to keep hold of customers. Customer engagement, offers, store credits, prizes, convenience, and contests are some of many tools used in loyalty management. But what benefits do organizations derive out of such programs? Is the cost spent on loyalty management justified?

Benefits of loyalty programs

Better customer retention

Loyalty programs exist to retain the customers who can drive the revenue of the company throughout their lifetime. Stores and companies offer various kind of incentives to customers for being loyal to their brand. Discount coupons, loyalty points, and redemption are often used so that the customer doesn’t defect and purchase from a competitor. So, is the expenditure on the loyalty management programs justified? First, it increases customer retention rate, which thereby drives future revenues. Also, companies will have to spend less money on marketing and advertising to drive purchases within the existing customer base. Also, numerous research suggests that loyalty programs increase the overall revenue, member spend, and purchase frequency.

Gather customer data and trends

In today’s age, data is power. Loyalty management programs offer the ability to gather customer data, their spending habits, and purchase patterns. It helps businesses to identify customer trends, their preferred shopping channels, and their response to marketing programs. Accumulating such vast customer data can assist the company with inventory management, promotional planning, and pricing. Additionally, marketers can also monitor the results of special promotions and new channels and drive the overall efficiency of their marketing programs. It is impressive how data analytics tools can know a customer as good as or even better than the traditional mom and pop store.

Increase in share of wallet

The data collected from loyalty management programs can be used to cross-sell and up-sell to the existing customer. For instance, loyalty programs can be used to offer customer extended warranties after an item is purchased or suggest accessories that would match the product. One of the best example of increased share of wallet is in airlines frequent flyer miles program. Once loyalty is established, customers spend more on the brand than a non-loyal customer.

Boost your reputation

Apart from incentivizing clients to stick around after the purchase, loyalty programs also work as a useful word-of-mouth tool. Loyal clients feel that the organization is valuing them and as a result, they would recommend the company to their peers. The more a customer feels cared for by the company, the more likely they will be to support the company and recommend it to others. Additionally, any marketing promotions run by the company will also be advertised by the customers within their circle.

Better communication tool

On the commencement of any loyalty management programs, customers give out their contact information and agree to receive promotions and communications from the company. It offers a direct line of contact to the customer facilitating communication. Companies can thus inform customers about new promotions, product launch, price drops, and new services offered. This way companies can drastically reduce the marketing and communication cost and at the same time increase the efficiency as well.

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Non-alcoholic beverage sector market analysis – How customer behavior analytics solutions helped a non-alcoholic beverage firm to find the right target prospects

LONDON: Quantzig, a global analytics services provider, has recently completed their latest customer behavior analytics for a non-alcoholic beverage firm. The non-alcoholic beverages market is witnessing promising growth owing to rising disposable income, population growth, and changing lifestyles. In a bid to grab this opportunity, non-alcoholic beverage firms are looking to monitor customer behavior to generate predictive insights.

“The customer analytics solution offered by Quantzig helped the non-alcoholic beverages effectively anticipate the customers’ demand and offer a differentiated set of products through the appropriate distribution channel.” says an industry expert from Quantzig.

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The customer behavior analytics solution also helped the company find the right target prospect with similar attributes so that they can tailor their marketing campaigns to enhance the business performance. Additionally, it also helped the client blend and analyze customer data across all social media channels.

Additional Benefits of the Customer Behavior Analytics Solution

Help increase the customer lifetime value
Efficiently map customer journey and enhance customer loyalty
Identify at-risk customers and help in taking corrective actions to minimize customer attrition
To know more, request a free proposal

To know more about how our customer behavior analytics solution helped the non-alcoholic beverage client

4 Unknown Benefits of Market Basket Analysis

Recent advancements in data analytics technology have opened up a world of possibility for players in the food and beverages sector to increase their operational efficiency and delight their customers. The advancements have increased to such a level that data scientists have been able to create algorithms that accurately predict the next group of items you are about to buy based on a certain group of items that were previously purchased. For instance, people who buy beer and plastic mugs are more likely to buy chips as their next item. Similarly, retailers can create relationships between specific items and accurately predict which items will be purchased next by assigning a certain level of probability. Market basket analysis can be used effectively to increase the overall spending from the customer by placing complimentary items close together or bundling such items at a discounted price.

Helps in setting prices

Market basket analysis helps a retailer to identify which SKU’s are more preferred amongst certain customers. For instance, milk powder and coffee are frequently bought together, so analysts assign a high probability of association compared to cookies. Without market basket analysis retailers would usually mark down on coffee on certain days, assuming coffee will be sold at certain times. However, market basket analysis can point out that whenever a customer buys milk, they end up purchasing coffee as well. So whenever the sale of milk and coffee is expected to rise, retailers can mark down the price of cookies to increase the sales volume.

Arranging SKU display

A common display format adopted across the supermarket chains is the department system, where goods are categorized as per department and sorted. For instance, groceries, dairy products, snacks, breakfast items, cosmetics, and body care products are properly classified and displayed in different sections. Market basket analysis helps identify items that have a close affinity to each other even if they fall into different categories. With the help of this knowledge, retailers can place the items with higher affinity close to each other to increase the sale. For instance, if chips are placed relatively close to a beer bottle, customers may almost always end up buying both. In contrast, if they were placed in two extremes, then the customer would just walk in the store buy beer and leave the store causing lost sales of chips.

Customizing promotions

Marketers can study the purchase behavior of individual customers to estimate with relative certainty what items they are more likely to purchase next. Today, many online retailers use market basket analysis to analyze purchase behavior of each individual. Such retailers can estimate with certainty what items the individual may purchase at a specific time. For instance, a customer fond of barbecues would likely purchase meat and barbecue sauce on some weekends. So retailers can customize offers to create a combo of 2lbs of meat with one pack of barbecue sauce at a discounted price every weekend to increase his purchase frequency.

Identifying sales influencers

All items in a retail store have some relationship with each other – be it strong or weak. In most cases, the sale of one item is driven by the increase or decrease in the sale of other items. Market basket analysis can be used to study the purchasing trend of a certain SKU. For instance, two SKUs can exhibit a strong affinity for a period of time and suddenly decrease because of various factors ranging from an increase in the price of one SKU, new brand introduction, or unavailability of a certain brand in the SKU. For instance, if Corona is the favorite beer among the consumers, and the brand is suddenly removed from the beer SKU, the sales of chips will go down as well, even though the sales of other beer brands is steady. This way marketers can understand the influence of such activities in the sales figure.

For more information on the benefits of market basket analysis, retail industry, food and beverage sector, data analytics, and predictive analytics:

Pricing Analytics Helps a Beverage Manufacturer Identify Pricing Improvement Opportunities

Over the years, the consumption of beverages has sneaked through conventional beliefs and has become a part of the daily course with a considerable number of people consuming it as an aperitif. The changing preferences of consumers have brought in a new dimension to the beverages industry with drinks being served across a majority of the restaurants. With the beverages market nearing its saturation, manufacturers have started relying on pricing analytics solutions to improve profitability and market share by augmenting prices and pricing strategies. Also, leading brewers are leveraging the use of analytics solutions to understand customers’ buying decisions and integrating the knowledge to meet the pricing needs of their consumers. In the beverages landscape, pricing analytics can help organizations to understand both the internal and external factors affecting profitability at the granular level.

To gain actionable insights, the client approached Quantzig’s pricing analytics experts. Quantzig’s pricing solution helps the client gain insights on the type of customers to focus, the products to rationalize, and how to effectively leverage the use of automation tools to make informed business decisions. The solution also helped the client gauge the potential impact of pricing change on the demand and profitability.

The Business Challenge

A major global beverage manufacturer with multiple breweries and thousands of employees has a vision to stay ahead of its competitors in the fiercely competitive market. In the multi-brand and multi-SKU environment, product differentiation was low. The client was facing pricing challenges in accurately evaluating the impact of pricing and promotion decisions. Like many many other manufacturers, the client had difficulties identifying the factors that were driving sales. In addition, the client needed the assistance of custom-built pricing tool to develop advanced pricing management capabilities for long-term success.

Our Approach

To gain more insights into the pricing analytics solutions, Quantzig’s team of pricing analytics leveraged the use of a choice-modelling tool to assess the effect of pricing and promotion decisions across multiple products. Also, the tool was capable of evaluating pricing actions down to the SKU-level. The robust model helped the client forecast volume and margin for the price, product, and brand combinations of interest. The team also developed an overarching strategic pricing framework to assess the impact of seasonality, advertising, customer preferences, and shelf location to generate consistent accurate results.

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Pricing Analytics Solution Benefits

Uncover both short-and long-term pricing improvement opportunities
Positively change store trajectory and stabilize sales and margin
Forecast demand for different pricing and promotion strategies
Regulate inventory levels and improve customer satisfaction
Design a robust price optimization model to recommend prices, thereby improving profits

Pricing Analytics Solution Predictive Insights

Assess the difference between their products and competitor products
Determine optimal price gaps with respect to competitor products
Generate desired sales volume by compromising on the trade budget
Identify the impact that discounted prices have on the sales to the end customer
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How Big Data and Weather Forecasts are Saving US Millions of Dollars

Many of us have learned to take weather prediction for granted in our day-to-day lives. We have an app or website that can tell us not only what the weather is currently like just about anywhere in the world, but also what it is likely to do for the next several days. While these predictions still may not be as accurate as we would like, they provide a degree of confidence in the weather that is truly impressive.

But weather prediction has far more uses than simply letting us know whether to bring an umbrella or how hot we can expect it to be for that tropical vacation we’re taking. Weather Analytics, a climate data company, estimates that the weather affects over 33% of global GDP. From individual farms to large companies to national governments, weather data is an invaluable tool.

Weather prediction is becoming more accurate and detailed thanks to the emergence of big data. Data analytics companies are able to collect vast amounts of information and produce detailed results for a wide range of uses. IBM, recognizing the importance of weather data, bought The Weather Company in order to be able to provide its clients with accurate, specific forecasts. It uses big data and machine learning in combination with The Weather Company’s global forecasting model to analyze the affect that weather has on things like customer buying behavior. This can allow businesses to better understand to what extent weather can be blamed or credited for changes in performance, and when it may be due to other factors.

Accurate weather prediction benefits agriculture in many ways. It is part of what makes precision agriculture possible, allowing for much more efficient use of resources and improved crop yields. Precision agriculture allows farmers to monitor every foot of their fields and care for them at a very fine level of detail. Using big data analytics, they can determine when and how to plant, fertilize, and harvest every individual crop, using only the resources that each one needs.

About 80% of water usage in the United States comes from the farming industry. With detailed weather analytics, farmers can reduce their water usage, giving the crops only as much as they need to reach the next rainfall. Weather analytics can also provide detailed information on factors such as humidity and the best crops to plant in a particular micro environment, leading to more successful crops and less waste. Better knowledge of the weather can also improve everything from fertilizer use to optimal harvesting time to efficient transportation.

There are many other areas in which weather analytics are beneficial. They can provide many savings to airlines, for example. Airplanes often fly with the minimal amount of fuel necessary to travel safely, in order to keep their weight as low as possible, saving fuel. Weather has a significant effect on the amount of fuel needed for a trip, so accurate weather prediction allows airlines to determine the optimal amount to bring.

Governments are also taking advantage of weather analytics. Evacuation and disaster recovery are extremely expensive, so the ability to predict and pinpoint the effect of storms and other events can save millions of dollars, and potentially many lives as well. But there are less dramatic uses of this technology as well, such as predicting how many resources will be needed to deal with winter snowfall.

It turns out that weather affects our lives and businesses more than we might realize. As the amount of available data grows and our technology becomes even better at drawing conclusions from it, weather analytics will be able to improve both profits and quality of life in an increasing number of ways.

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