The Leaky Bucket Theory or Analogy?The leaky bucket theory is more of an analogy than a theory. It is used because it is a nice and simple way of understanding the concept of customer relationship management and how to increase customer lifetime value.The theory uses a bucket that has several holes in the base and […]
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CLV and Customer Relationship Management (CRM)The customer lifetime value equation essentially views a customer as an income stream. So instead of considering the customer’s purchases as single transactions, the marketing focus becomes creating ongoing series of profitable transactions. These ongoing transactions are created through customer relationship management practices and strategies – with the success of
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Let’s look at the main CLV formula is two ways – the first way in words and then as a CLV equation (see separate article on another one of my websites). As you will see, the main customer lifetime value formula is an extension of the simple CLV formula. The main changes are that the
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There are two main approaches to calculating customer lifetime value.This article discusses the simple approach to calculating customer lifetime value – which is appropriate to use when customer profit contribution to each year are relatively flat. It is also a good idea to review the article on the full customer lifetime value formula, also available
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Why calculate customer lifetime value?Why has customer lifetime value – along with many other marketing metrics – becoming more important for marketers to use and understand? One of the key drivers is the shift from “art” to “science” in the marketing profession.For many years, marketing was essentially a creative process or a people relationship skill
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What is Customer lifetime value?Customer lifetime value is a measure of customer profitability over time. To help explain this concept, let’s start with a formal definition of customer lifetime value (CLV) from a well-regarded marketing metrics textbook. In the textbook Marketing Metrics: the definitive guide to measuring marketing performance (Farris et al 2010), the authors
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Here are two videos where you will learn how to make a BCG matrix on Excel from start to finish. The first video covers Excel 365, and the other video is for older versions of Excel.Alternatively, if you are new to Excel, please note that there is a free Excel template available for download on
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There are relatively few calculations required in order to construct effective BCG matrix. Probably the most difficult decision is to define the market – as there are often numerous ways of defining the market, as is further discussed below.In terms of constructing the BCG matrix after the market definition, there are two calculations required, namely
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Using the BCG matrix for portfolio analysisOne of the prime uses of the BCG matrix is for portfolio analysis – that is, to ensure that the overall company has an appropriate mix of business units and/or product in its overall portfolio.In this article on the BCG matrix and portfolio analysis, both good and poor portfolios
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The output of the BCG matrix classifies businesses or brands or products into one of four quadrants.Each of these four quadrants are defined by the intersection of two marketing metrics – namely the market growth rate (a measure of market opportunity and potential) and relative market share (a measure of competitive strength).The four quadrants that
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