Activity 124: Using Customer Lifetime Value Introduction In this customer lifetime value exercise, you need to calculate the customer lifetime value for both the firm's business AND individual customers. Given these calculations, what advice would you have for the firm? Activity/Task Using CLV at an Accounting Firm An accounting firm currently provides accounting advice to 1,000 businesses and 2,000 individuals. In the past year around 100 business customers and 500 individual customers were acquired through marketing campaigns. One of their accountants has determined the following: The total spent on the campaign to attract new business customers was $1,000,000 The total spent on the campaign to attract new individual customers was $500,000 The annual servicing cost of the business client is $5,000, and $500 for an individual The average annual income for a business client is $10,000 The average annual income for an individual is $1,000 The average time they remain a client is 10 years (business) and 4 years (individual Your Calculations Business Customers Individual Customers Annual Revenue Annual Costs Years a Customer Acquisition Cost (Note: Divide the total promotion expense by the number of customers acquired) CLV Page 212 TOPIC SEVEN Customer Relationship Management discussion Questions 1. Should this firm focus on acquiring new business OR individual customers (or both)? 2. Why? Show your reasoning. 3. Which of the following approaches would likely have the greatest impact on CLV? A Enhancing customer loyalty 8. Growing income/revenue per customer C. Reducing acquisition costs D. Reducing service costs You will need to calculate the different impacts of each approach above Activity 124: Using Customer Lifetime Value Introduction In this customer lifetime value exercise, you need to calculate the customer lifetime value for both the firm's business AND individual customers. Given these calculations, what advice would you have for the firm? Activity/Task Using CLV at an Accounting Firm An accounting firm currently provides accounting advice to 1,000 businesses and 2,000 individuals. In the past year around 100 business customers and 500 individual customers were acquired through marketing campaigns. One of their accountants has determined the following: The total spent on the campaign to attract new business customers was $1,000,000 The total spent on the campaign to attract new individual customers was $500,000 The annual servicing cost of the business client is $5,000, and $500 for an individual The average annual income for a business client is $10,000 The average annual income for an individual is $1,000 The average time they remain a client is 10 years (business) and 4 years (individual Your Calculations Business Customers Individual Customers Annual Revenue Annual Costs Years a Customer Acquisition Cost (Note: Divide the total promotion expense by the number of customers acquired) CLV Page 212 TOPIC SEVEN Customer Relationship Management discussion Questions 1. Should this firm focus on acquiring new business OR individual customers (or both)? 2. Why? Show your reasoning. 3. Which of the following approaches would likely have the greatest impact on CLV? A Enhancing customer loyalty 8. Growing income/revenue per customer C. Reducing acquisition costs D. Reducing service costs You will need to calculate the different impacts of each approach above