5 June 2015
The marketing world has a whole set of jargon of its own. Here is an explanation of the key terms.
Method for differentiated calculation of indirect costs and overhead costs. This gives a clear insight into the products or customers that are causing a profit/loss.
This is the percentage of purchases by new customers in proportion to the total number of customers that approached, made inquiries, asked for a quotation, etc.
Limiting the number of addresses for purchasing data. For example, by not selecting addresses with a response probability lower than a given value such as the break-even response probability.
Tool for measuring the current performance (by 4 main aspects: customers, finances, internal processes, knowledge) plus the efforts being made to improve processes.
The service that a customer can expect from the organisation, usually seen in the context of how significant that customer is for the company.
This refers to the subjective and immaterial opinion the customer has of the brand. The value of the brand can be monetised using certain statistical techniques. The value of the brand partly depends on brand loyalty, brand familiarity and brand image.
The position that the brand occupies in the customer’s experience, compared to other brands.
The extent to which a customer feels committed to the organisation or the product.
Selling other supplementary products or services to a customer.
Customer equity means the ‘life-long’ value of a customer, which is the binding agent for an organisation. To a large extent, the value of a company is determined by what customers are willing to pay for the products and services. CE is driven by three forces: Value Equity, Brand Equity and Relationship Equity
A data storage repository containing an ordered collection of well-defined data derived from various different operational structures and other sources. In a data warehouse, data is integrated, subject-orientated and permanently fixed, making it possible to run analyses and discover specific patterns. Amongst other roles, a data warehouse should support the decision-making process in a company.
Selling higher volumes of the same product.
This method makes it possible to assign some or all costs directly to individual customers.
Costs that can be directly attributed to a specific activity or department or person such as making a quotation and IT costs for a specific department.
Costs that fall under the direct responsibility of the management. Practically all communications costs, recruitment of employees and other commercial activities can be put under this category, but so can recruitment of customers, targeting, promotions, campaigns and predictive modelling.
Costs that are incurred to carry out or bed in an activity.
Costs that cannot be attributed directly to a department, activity or person. I.e. overheads. In individual customer value calculations, these costs are what presents the most significant bottleneck.
The Internal Benchmark Method is derived from the RFM method, which means:
R = Recency
F = Frequency
M = Monetary Value
This method divides customers by these three features. This results as such in an approximation of the customer value that can be determined over time or after carrying out certain customer programmes for the RFM segments that have undergone growth, stagnation or decline. This method can be applied if a company does not or does not yet directly have any attributable costs.
The ratio between dissatisfied customers and those that complain.
A method developed by Cmotions to make it possible to divide up the maturity of the relationship with the customer into a number of phases. This method allows you to determine which factors are significantly important for the transition to a later level of maturity. At each phase of the relationship with the customer there is added insight into the contribution made by the customer to the company’s profit or loss.
All costs where there is contact and/or information exchange with customers, such as publicity costs, personal contact, contact costs and costs for other channels, customer service, costs for intermediaries, experts and advisors.
The extent to which the performance the customer can see matches up with his or her expectations. The general hypothesis is that satisfaction makes them more inclined to make repeat purchases, purchase new or additional services and products and enter into a long-term relationship with the company.
Calculating the profit/less contribution made by a customer to the company.
The essence of Customer Value Management is finding a good balance between the customer’s value to the company and the company’s value to the customer. To do this requires having insight into the factors (‘value drivers’) that can bring down or push up the customer value.
This is a binary segmentation of customers, based on value, value drivers and needs.
Factors that significantly determine Customer Value. These can include important factors to customer satisfaction, response speed, contact duration and complaint ratios. And also the extent to which you are able to attract the right customers.
The value of a customer over a (fixed or estimated) duration of the relationship with that customer.
A strategy with the aim of retaining and further growing existing customers by using specific methods and resources.
The range of communications activities and channels intended to maintain or improve the product image or promote the sales of products and services. Strategic marketing communication is aimed at developing a strong brand. Part of the Marketing Communication Mix is ‘Promotion’, which consists of a number of tools such as advertising, direct marketing, trade fairs, in-person sales, etc.
All costs that are incurred for marketing activities that aim to obtain increased awareness.
This serves to interpret the mission and vision of an organisation in measurable indicators. The interpretation process employs a number of perspectives, such as: customer experiences, quality of internal processes, financial results and the organisation’s ability to learn.
Dividing the market into groups of customer or potential customers that have common features, needs or interests and for which the company can develop, communicate and market a corresponding and distinctive proposition.
A scan developed by Cmotions that gives a customer an indication of the level of customer focus that the company has reached. It also gives a growth path to reach the next step up the customer focus ladder. The Maturity Scan can be found on: www.Cmotions.nl.
An existing customer recruits a new member and receives a reward for it.
A type of advertising that spreads amongst consumers themselves. Emotion and experience are essential parts of this. Weblogs and other modern communication methods play a key role in this now.
The monetised value.
All costs that cannot be attributed to the company’s core activities.
Developing models in order to select groups of customers for particular marketing objectives or activities such as selection for inbound/outbound promotions, churn probability, credit risk, but which can also be used to predict things like a customer’s growth potential.
Adapting/renewing existing products and services or developing new products and services.
The proposition consists of all the product-related, psychological, communicational and service-related elements that a supplier of a particular brand has created for specific group of consumers/customers.
The willingness of the customer to remain loyal to a brand or supplier despite there being acceptable and available alternatives. Important drivers of this are loyalty schemes, affinity (“this is my brand”), community, loss of incremental added value by going away.
The amount of time it takes to receive a response to a marketing promotion or marketing communication.
The extent to which customers (preferably with a high Lifetime Value) stay and their departure can be avoided.
The ratio of “loyal” customers to Switchers/Churners
These stand for three variables: the Recency of the last purchase, the Frequency of previous purchases and their Monetary Value.
Clustering customers or groups of customers with specific features.
The quality and extent of the service a customer receives.
This is an agreement between a provider and a customer in which they stipulate a minimum acceptable level of service.
The proportion of a product category that is bought from one specific company. It is a percentage of the customer’s total wallet.
Selecting specific groups of customers for particular operational marketing objectives.
Selling more expensive products, upgrades or other add-ons.
This refers to the customer’s objective opinion of the value of a brand/product.
These are costs that change because of increases or decreases in production volume, such as the costs of raw materials, but also communication costs and marketing costs.
These are costs that do not vary depending on the volume of production or usage.
This principle is also known as the 80-20 rule.
The striking thing about the 80-20 rule is that it is the complete opposite of what we actually expect. We usually assume that 50% of our activities also produce 50% of the results (and sometimes that’s right). But, in practice, this 50-50 idea turns out to be both a highly inaccurate and highly ingrained mistake. The Pareto Principle shows that a small number of causes (low input or effort) are responsible for the majority of results (output or reward). Literally that means that, for example, 80% of the results achieved by an organisation come from just 20% of all the work put in.
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