Customer Behavior & Branding · 2019-03-18 · Senior Fellow, Indian School of Business, India ... customers’ social media influence on other acquired customers and prospects Customer

www.drvkumar.com© Dr. V Kumar

Customer Behavior & Branding Course 21 B

PGPpro 2018-19

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 14, 2019 HyderabadApril 21, 2019 Delhi

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Conceptual Approach to Measure CEV

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• Totalvalueprovidedbycustomerstothefirmsthroughtheir(a)purchasetransactionswiththefirm,(b)abilitytoreferothercustomerstothefirm,(c)powertopositivelyinfluenceothercustomersaboutthefirm’sofferings,and(d)knowledgeaboutthefirm’sproduct/serviceofferingsinprovidingafeedbacktothefirm.

• Totalvalueprovidedbycustomerstothefirmsthroughtheir(a)purchasetransactionswiththefirm,(b)abilitytoreferothercustomerstothefirm,(c)powertopositivelyinfluenceothercustomersaboutthefirm’sofferings,and(d)knowledgeaboutthefirm’sproduct/serviceofferingsinprovidingafeedbacktothefirm.

CustomerEngagementValue(CEV)

CustomerLifetimeValue(CLV)

CustomerLifetimeValue(CLV)

Netpresentvalueoffuturecashflows

fromacustomeroverhis/herlifetimewith

thecompany

Netpresentvalueoffuturecashflows

fromacustomeroverhis/herlifetimewith

thecompany

CustomerReferralValue(CRV)

CustomerReferralValue(CRV)

Quantifiablemeasureofthetype,quantity,&effectivenessof

paidreferralsthatanindividualcustomerprovidestoothers

Quantifiablemeasureofthetype,quantity,&effectivenessof

paidreferralsthatanindividualcustomerprovidestoothers

CustomerInfluenceValue(CIV)

CustomerInfluenceValue(CIV)

Monetaryvalueofcustomers’socialmediainfluenceonotheracquiredcustomersandprospects

Monetaryvalueofcustomers’socialmediainfluenceonotheracquiredcustomersandprospects

CustomerKnowledgeValue(CKV)

CustomerKnowledgeValue(CKV)

Valueacustomeraddstothefirmthroughhis/her

feedback

Valueacustomeraddstothefirmthroughhis/her

feedback

FirmandCompetitiveActions

CustomerBehavior/Attitudes/NetworkMetrics

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

CustomerBrandValue(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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Conceptual Model

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Client Firm Size

ReferenceMedia Format

Reference Congruency

Business Reference Value (BRV)

Length ofClient Relationship


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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BRV Sample Problem

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The BRV of GSU for IBM is 2,086.96

Georgia State University (GSU) refers six other universities to purchase IBM’s cloud computing service.

Given the details below, calculate the Business Reference Value (BRV) of GSU for IBM. Assume the discount rate is 15% per year.

University Name Ref DOI CLV ($) Time

70%Georgia Tech 80% 1000 Year 1

Emory 60% 70% 2000 Year 1

MIT 20% 60% 2500 Year 2

UT 50% 50% 1000 Year 2

Harvard 30% 40% 2000 Year 3

Michigan State 60% 50% 1500 Year 3

486.96

730.43

226.84

189.04

157.80

295.88

BRV


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 Firm2. 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.)

Decile CLV (‘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 ServicesVariable High BRV

n = 44Low BRV

n = 44High BRV

n = 47Low BRV

n = 47

Average CLV (‘000s) 18.4 5.8 18.7 5.2Average Tenure (Years) 10.3 4.9 14.7 6.8Most Common Format Video Call Me Video Call MeAverage # of Employees 2,710 468 2,158 318Average 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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ON AVERAGE, THE LIKE AND SHARE BUTTONS ARE VIEWED ACROSS ALMOST 10 MILLION WEBSITES DAILY

PHOTO UPLOADS TOTAL 300 MILLION PER DAY

REVENUE ‐ $13.2 BILLION; 91% FROM MOBILE ADS

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Source: https://zephoria.com/social-media/top-20-valuable-facebook-statistics/

https://venturebeat.com/2017/07/26/facebooks-revenue-growth-falters-even-as-whatsapp-and-instagram-surge/

AS OF SEPTEMBER 2018, 1.47 BILLION PEOPLE LOG ONTO FACEBOOK DAILY (ACTIVE USERS) WHICH REPRESENTS A 11% INCREASE YEAR OVER YEAR

FIVE NEW PROFILES ARE CREATED EVERY SECOND

EVERY 60 SECONDS ON FACEBOOK: 510,000 COMMENTS ARE POSTED, 293,000 STATUSES ARE UPDATED, AND 136,000 PHOTOS ARE UPLOADED

42% OF MARKETERS REPORT THAT FACEBOOK IS CRITICAL OR IMPORTANT TO THEIR BUSINESS


WHATSAPP IS A MAJOR SOURCE OF NEWS IN SEVERAL COUNTRIES

FACEBOOK OWNS WHATSAPP, MESSENGER (1.3 B) AND INSTAGRAM (800 M)

NO ADS – IS IT ABOUT THE MONEY?‐ USERS PERSONAL INFORMATION

‐ BEHAVIORAL DATA‐ BUSINESS COMMUNICATION & SUPPORT (INTERNAL/CUSTOMER)

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Source: http://mediakix.com/2017/08/whatsapp-statistics-users-chat/#gs.rxZ7bHs

http://www.profitbooks.net/how-to-use-whatsapp-for-business/

AS OF SEPTEMBER 2018, 1.5 BILLION PEOPLE CHECK THEIR WHATSAPP DAILY

100 MILLION VOICE CALLS MADE EVERY DAY

70% OF WHATSAPP USERS ALSO USE FACEBOOK MESSENGER.

WHAT’S THE FUTURE?‐ PEER 2 PEER PAYMENTS‐ FOOD ORDERING & BOOKING SERVICES


500 million Tweets sent

per day

336 Million Monthly Active Users

72% 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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www.drvkumar.com© Dr. V Kumar 26

Customer Behavior & Branding · 2019-03-18 · Senior Fellow, Indian School of Business, India ... customers’ social media influence on other acquired customers and prospects Customer

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