Analytic Foundation for a Customer-Value Driven Marketing Strategy
Sagence’s depth in customer data analytics helped a high-end tool manufacturer operationalize a “customer equity” valuation model that reduced customer acquisition costs, customer churn and facilitated marketing-spend decisions.
Our client, a vertically integrated high-end tools manufacturer, experienced diminishing revenue, significant customer churn, and a high degree of one-time-only buyers. Our analysis determined that marketing investments were not tailored to expectations of customer value. The current marketing strategy relied on an initial estimate of customer potential with no on-going revisions based on customer behavior. In addition, sales efforts were not coalesced around the customer but were scattered across a number of separate uncoordinated initiatives around product lines.
Our team created a model for customer value based on “customer equity” as well as transaction recency, frequency, and revenue measures along with product category measures. We developed an analytic and operational process for classifying customers by value and then periodically monitoring their value change so that marketing interventions and programs could be developed to match both the desired marketing impact as well as the optimal marketing spend. In addition, we extended the valuation concept for application to customer acquisition for better utilization of prospecting efforts. Lastly we provided guidance for implementation of a pilot program for live testing and acculturation of the customer value model nationwide.
Our client realized a significant reduction in new customer acquisition cost and higher returns from customer development programs, evidenced by a reduction of one-time buyers, reduced churn, and improved customer transaction metrics over time. This solution has since been rolled-out globally.
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