How to evaluate the lifetime value of customers?

What is customer lifetime value? In the sales industry, it is the sum of the benefits brought by customers' purchasing power of products. For example, after the product is favored by customers, the product owner and customers reach a trading relationship. Then, for the person in charge of the product, the transaction reached with the customer is definitely profitable for himself, and the acquisition of this profit is the value embodied by the customer.

Different customer values are related to different periods and durations. Some customers may only have one cooperation period, and some customers will continue to cooperate in cycles and continuously generate profit contributions. Therefore, evaluating the lifetime value of customers is actually speculating on the sustainability of customers' profit contribution.

A company held a seminar to find a partner for a project. In this seminar, the main discussion content is to evaluate the value of several established partners, so as to choose the one with the highest value for connection and cooperation.

According to the information in their hands, several major customers have been listed, such as company A, which has many outlets all over the country and a wide range of sales radiation; Company B is a Sino-foreign joint venture. Although there are few domestic sales outlets, its brand promotion is full and people trust it. The production line of Company C is one of the larger companies at present, and it can be mass-produced when necessary, which contributes to the output rate of finished products.

In this regard, a decision maker said: "For our company, I think Company C is more suitable. Although it lacks popularity, the production line is large, which just makes up for our shortcomings. Isn't it because we think this project is feasible, but there is no production capacity? "

As soon as this statement came out, it immediately caused a lot of comments from people in the place, both for and against it. The general manager of the marketing department expressed his views.

"Since this meeting is to evaluate the value of these companies, we should analyze the value of each company in order to draw a conclusion. What Manager Li said just now is also reasonable, but it is not necessarily the best choice, because this kind of value is not only to cater to our shortcomings. Besides our basic interests, we should also consider what it can bring us. ...

For example, Company B, although the production line is not the largest, has the greatest influence. If we cooperate with them, we can make full use of this value and inspire it in the sales process. For example, in the sales process, we can tell customers that' our products use the production line of well-known enterprise B'. Then only by this, our market pricing can be higher, because consumers' trust in company B can also increase our market share and increase our sales. In addition, we can also use the publicity of company B. "

This view immediately won the unanimous approval of everyone.

The general manager of the marketing department went on to say, "In addition, the value generated by Company B is far more than that. With the reputation of Company B, we can gain a higher social status and win a higher reputation among peers and the public. With the prestige of Company B, when we show the talent market that we are using Company B's production line, we can also attract more talents, improve the trust and confidence of talents in our company, and make all employees of the company proud of our use of Company B's production line ... These are all added values that cannot be ignored. Under the influence of these added values, our actual financial benefits will be greatly improved. "

In this regard, some people agree: "Yes, if we can cooperate for a long time, then this force is like a merger of enterprises. For a large enterprise with reputation and market influence like Company B, its contribution to our company's profits will also be sustainable. The temporary value of a customer does not mean long-term, but the lifelong value derived from it is the most worthy of our attention. "

……

After discussion and unanimous agreement, cooperation with company B is the best scheme.

In the case, on the surface, it seems that Company C can just supplement the original intention of the project R&D Company to seek cooperation, and can provide a large-scale production line to improve the output rate of finished products. However, compared with company B, the added value it can generate is far less than the long-term contribution of company B to the project R&D company. This is actually a reflection of brand value.

Especially for a small company that has just entered the market and its market influence has remained in a mediocre position, brand value can definitely raise the company's image to a higher level. Compared with the value creation of money, the popularity, trust and influence of enterprises in the public mind will be improved, so that enterprises will continue to develop.

If an enterprise is regarded as a product, then for a product, the focus of marketing is nothing more than the market positioning, promotion and sales of the product, but if you can seek opportunities to increase the value of the product, why not?

In this regard, we can also regard it as a process of downstream enterprises driving development through upstream enterprises, a kind of value transfer and drive. As the case says, "this power is like business combination", therefore, the lifetime value data of customers with this utility must not be underestimated.

The concept of customer lifetime value is put forward, which makes the concept of marketing through customer lifetime value evaluation quickly integrate into the market and be absorbed and utilized by marketers. Therefore, there are many calculation methods for estimating customer value.

Here, let's explain the RFM estimation method first. The so-called RFM mainly refers to the initial composition of English words such as the latest purchase date, the purchase frequency of each period and the average single purchase amount of each period, and its calculation method is of course inseparable from these three important data.

The concept of RFM estimation holds that a series of price values such as purchase amount and purchase frequency will be predicted by effectively calculating the latest purchase date, purchase frequency and average single purchase amount of customers in each period. Then further calculate the gross profit margin of sales and the expenses generated by relationship marketing, so as to calculate the value generated by customers in the year, quarter and month.

The simple formula can be listed as: customer value (CRM gross profit) = purchase amount-product cost-relationship marketing expenses.

At present, RFM estimation method can be said to be the most mature and widely accepted customer value estimation method in the world.

Of course, in addition to the gross profit margin on the book, we should also consider the potential value and added value generated by customers.