7.2: Project—Creating Customer Portfolios
The company to use is DTV
In this assignment, you will create two customer portfolios for your own organization or for one you have enough information about in order to make sensible predictions relating to customer retention. If your company has a social media site, be sure to examine whether or not it serves as a good point of customer service. If so, include it in at least one of your customer portfolios.
Retaining the customers if very important for each and every organization as it is much cheaper to retain a customer than acquiring a new customer. The quality of profit earned from a customer can easily be described the Customer Lifetime Value. It represents the profit that the company will acquire from a customer by selling a service or product to them. In this paper we will take a look at the calculation of the CLV and also take a look at the power core of the organization and how it affects the CLV of the organization. For this paper the organization selected is DIRECTV.
Using the data from the financial statements of DIRECTV for the year 2013 we have following observations:
1. The company enjoys a very high retention rate of 98.5%. Only 1.5% customers leave the subscription of the organization
2. The total customer base for the organization for the year 2012-2013 was 20.253 million customers
3. The total revenues for the company = $24,676 million
4. Total operating cost in selling services to the customers = $13,383 million
5. Subscriber acquisition costs = $2,642 million
6. Upgrade and retention costs = $1,350 million
Using the above data the total costs for selling subscriptions to the customers can be calculated as below:
Total Costs = $13,383 + $2,642 + $1,350 = $17,375 million
Total Revenues generated from selling services = $24,676 million
Hence gross profit for all the customers = $7,301 million
Hence CLV = $7,301/20.253 = $364
Hence for each loyal customer that stays with the company, the company would earn revenue of $364 per year.
Identifying the Power Core:
DirectTV is a very huge organization given the huge amount of customer base and the high retention rates it has to boast for. There are many strengths of the organization but the main strength of the organization comes from the customer base of the organization. Having said that it is quite obvious that the customer base has come from the marketing strategies of the company. Hence the power core of the organization can be thought of as the marketing arm of the company. The marketing Arm of the company ensures a very high retention rate. In the television broadcast business maintaining a high retention rate is very tough task but the company has the numbers to prove that their service and the marketing has achieved the task. For the year of 2013 the attrition rate was just 1.5% and for the year prior to that it was 1.53%. As it can be seen that they have managed to reduce the attrition rate and hence improve their retention rates.
Besides marketing arm of the company there are other power silos that has to be dealt on a daily basis. These are described as below:
Information Technology: The customers will not be only pacified by the good marketing of the company. They must receive a good broadcast service also to enjoy the subscription. It is here where the Information technology plays a very important role and something that as an employee of the company I have to deal on a daily basis whenever a customer complains
Product: the company offers very lucrative offers for subscriptions which obviously lure customers towards to the company. This coupled with the good customer service and a very good technological service ensures that the customers are happy. I have to deal with the products department on a daily basis as more and more customers come to company for subscription.
DirectTV, 2014. DirectTV Annual Report 2012-2013. Retrieved from http://investor.directv.com/files/doc_financials/annual/DIRECTV%202013%20Annual%20Report.pdf Retrieved on April 15, 2014
Learning relationship is the relation with customer that gets better with every interaction. This kind of relationship works as a central engine of the direct enterprise strategy. The best customers that DTV can develop a learning relationship with are the households in United States and the Latin America. The bestway that a company like DTV can develop and maintain learning relationship is through ensuring that the customer gets the best quality. Each department in the organization needs to be on toes always so as to deliver the best to the viewers. The key to successful customer relationship is by; showing respect to the customer, delivering what the customer wants to hear even it is not good for the presenter. Customers are always rights as it is said in the business language. For good customer relationship, it should be made a win-win relationship. There are strategies that if implemented well by DTV they will lead to the development of good learning relationship with the customers. Collaboration and coordination between all the department is one of the strategies. If all the departments are well coordinated with each other, then the cases of a transmission error will be minimal if any. If the errors in transmission are less then a good learning relationship is established with the customers. The information technology department can come up with a website which will act as center where in collaboration with the secretariat department, the feedbacks of the customers can be assimilated and suggestion made based on them.Active listening is very important in addressing the needs of any customer thus the company through its various departments such as the secretariat should be able to establish open communication system with the customers. Social media is a recent technological revolution that if well utilized can be very effective in establishing a learning relationship with customers. The customers can ask for what they need and make suggestion on how to improve the company through the social media like Facebook and twitter.
Theme 2: Designing the Customer Portfolio
After your hard work identifying the cultural changes of your organization and the impact of a customer-centered focus upon internal processes, you are ready to dig deeper and to design a couple of customer portfolios. These portfolios are an important aspect of the final portfolio you will submit to your boss and higher leadership. They need to be able to see how an identified customer relationship could be followed across time, encouraged by a learning relationship based on trust and cultivated for years to come.
You recall working on identifying customers in your organization whose long-term value could begin to be calculated and potential interactions predicted. You will review those documents and use the data to help you create customer portfolios. Select two customers to focus upon, ones for whom you believe you could create a portfolio as each entered your organization's touch points of service.
Identify Channels of Customer Entry
First, you will identify different customer entry channels. For example, one customer enters through the website after answering a short quiz about choosing one of your products. Identify the point at which this customer entered name and contact information, the database that held this information and all the employee groups that had access to it. You then identify all of your organization's internal groups that would contribute to the purchase of the item and would interact with the customer through the website. Based upon your analysis, some questions will surface:
· At what points would the customer be encouraged to purchase other items or services before leaving the website?
· What would happen if the customer had a problem? Which channels would respond?
· Would the customer information be available to those people?
· What could be sold to the customer once the problem was solved?
· How could that message be considered by the customer to be caring rather than sales-oriented only?
· How could trust be reinforced at this point of service?
· What would happen after the purchase?
· How often would your organization approach this customer? With what new offers?
You decide that you could approach this customer once every three months with a new suggestion for a purchase. This would remind the customer that he is a valued customer without your company becoming a nuisance. Additionally, you decide to include a trust-builder at a specific point in the process, where handy and hard-to-find product-related hints will be provided.
Next, you propose to follow this customer for the next 10 years, offering a trust-building sales proposition related to life events that would most likely occur. For example, for a customer who could soon be an “empty-nester,” your organization could offer hints for obtaining non-profit donation tax benefits as he prepared to downsize his home. Then, at the same time, you could offer one of the services your organization provided for this customer category.
Each opportunity you create for customers to purchase will also be attached to an opportunity to learn from the customer. You recall that customers are eager to offer their insights; and the more opportunities you offer, the more your organization could learn from them. You identify the databases where the information is stored and how it is attached to the initial contact with the customer. You use this data-gathering process to gradually build a picture of a sample customer so that your leaders could watch the learning process occur. At the conclusion of the portfolio, your customer seems to come to life!
Once you complete two other customer portfolios, you believe you have a convincing presentation for the customer-centered approach. You have shaped real customers for your leaders and employees to “see.” You plan to use this to inspire and motivate your leaders and fellow employees, and format a guide for future use.
Customer Portfolio Formation Guide
· Identify current customers, gathering as many facts as possible.
· Trace all touch points within the organization, from the first channel of purchase to the last.
· Design scenarios for building trust-based learning relationships.
· Bear in mind the impact of social media sites as opportunities to inform your customers as well as to learn about their upcoming life events.
· Create future purchase opportunities paired with stated benefits to the customer.
· Identify supporting processes that build trust with your internal processes and employees.
· Identify opportunities for customer feedback that enhance the customer relationship.
· Predict future opportunities for retaining customers, following life events and predicting how often you would approach them in order to build but not endanger the relationship.
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