MARKETING MANAGER                Responsibilities 

1. To deliver the annual Budgeted Profit Contribution

 * Profit contribution is defined as the PROFIT less certain Overhead + Interest Expenses that are the responsibility of General Management

2. To develop medium & long term plans to ensure steady and profitable growth of the company

* This is done by improving the position of established brands and launching new brands

3. To build a strong Marketing organization through the hiring, training and development of personnel

4. To motivate Product Management & Advertising agency personnel to high standards of professionalism

5. To direct the customer relations, advertising services & Market research functions
6. To establish Product Development priorities with R&D and Senior Management

 Functions of the Marketing Manager who has to see to the following:

 i.                    CUSTOMERS: User profiles                                                                  ii.                  MARKETS: Where the products & services are sold                                   iii.                COMPETITORS: Their influence                                                                       iv.              PRODUCTS/SERVICES: The reasons for their existence                                      v.                  MARKETING CHANNELS: Selling paths                                                          vi.                SALES ADMINISTRATION: Selling Efficiency                                   vii.              ADVERTISING: Media Programs                                                                   viii.            SALES PROMOTION: Sales Inducements                                                ix.              PRICING: Profitability Planning

Customer Lifetime Value Analysis   By: Nykamp Consulting Group

Before you can make informed and knowledgeable decisions about budget allocations, you need to determine a key business measurement: Customer Lifetime Value (LTV). Lifetime value is the net present value of all future contributions to overhead and profit expected from a new customer. In simpler terms, how much a customer is worth to you today, given how much profit she/he will generate in the future. As a marketer, you have dual objectives: to acquire new customers and to retain your current customers. But how much money should you allocate to meet these objectives? How will these allocations affect long-term profitability? Does every customer deserve the same investment?

LTV analysis answers these questions and helps you determine:

How much you can afford to spend to acquire a new customer? Which new customer sources generate the most profitable long- term customers? How much you can afford to spend to retain and/or reactivate an existing customer?

LTV analysis measures and projects the future revenues and long-term profitability of a customer, based on their interactions with you over time. You may be able to measure what a new customer has spent with you to- date, but LTV allows you to project their future profitability with your firm as well. How is LTV Used?  Marketers use LTV to estimate the profitability of an average customer over time and to differentiate between high and low value customers. Some of the key differentiators of customer LTV include:

Initial Source. Whether the customer was acquired via subscriber list, catalog list, referral, inquiry. Initial Media and Format. Whether the customer was acquired via direct mail, two-step, phone, e-mail, web registration, catalog. Initial Offer. If a discount, buy one-get-one-free, or no special offer was used. Initial Purchase Characteristics. Amount, product category, date, payment method, and placement method. Geo-demographics/Firmographics. Age, marital status, car ownership, income, presence/age of children, company size, company industry, and/or others.

These and other differentiators allow you to explore:

What are my best sources for new customers? For example, customers acquired through list rentals may have the highest initial response rates, but customers who responded to space ads may have higher long-term repurchase rates and therefore higher lifetime values. Depending on the costs associated with each of these acquisition methods, it may be more profitable to increase space advertising and decrease list rentals/direct mail. Which offers produce the best long-term buyers?  You may see drastic differences in LTV between customers that came in on a low introductory offer and customers that came in without a discount. While the quantity of customers responding to the discount may far outweigh the number that responded to the full-price offer, the full-price group may reap consistently higher sales/margins and may remain active customers over a longer period of time.

Does first item purchased affect long-term profitability?  If you find that the LTV of customers who initially purchase from a certain brand or product category is significantly above average, you should consider expanding the number and presence of these items in future acquisition efforts. What are the geo-demographic profiles of high-LTV customers? For example, if you know that your most valuable long-term (i.e., high- LTV) customers are from dual-income/no children households, then tailor and target your acquisition efforts to the needs, interests and geography of these markets.

Data Requirements: Your measures of LTV will only be as meaningful as the data that are used in its calculation. The optimum data required to perform LTV include:

Customer Transaction History, What they have purchased (preferably item level detail), How much they have spent, When they have purchased, How many returned / cancelled items, Where they have purchased, Potential indicators of why they have purchased: special offers, holiday promotion, etc. Financial Measures used in measuring LTVA: Cost of Goods (preferably at the item level), Variable Costs, Fixed Costs, Fulfillment Costs, Gross/Net Sales Ratios, Promotion History, How many promotions/contacts they received, When they received the promotions, Special offers and other promotion characteristics & all of the costs associated with the promotions.  If detailed information in any of these data categories is not available, estimates are often employed. Note that the intent of LTV analysis is not to count pennies, but rather to identify customers who you can count on. How is LTV Calculated?

Lifetime value estimation is calculated by using recent customer buying patterns to project future profit contributions. LTV analysis takes into consideration:

Net present value of all current and projected customer revenue streams. Actual and projected expenditures against those revenue streams. LTV is typically measured on an individual customer basis, by tracking all transaction and expense detail on a marketing database. This information is then used to construct a scenario, based on past performance, to determine the future revenue streams of the customer base. Following is a simple worksheet that calculates customer lifetime value over a five-year period: Here is a brief explanation of the above calculation: Revenues

Assume you acquire 100,000 new customers in Year 1. You retain 60% of your new customers into Year 2 and the retention rate of this shrinking group of customers increases over time. New customers purchase on average $75 each, in Year 1 and this also increases over time.

Total revenues for Year 1 from the 100,000 new customers ($75 * 100,000).

Costs as a percent of total revenue. Costs should include all costs incurred to generate and fulfill an order, such as advertising costs, cost of goods, fixed costs and variable costs. Total costs is simply the cost % * total revenue. Profits:  Gross profits are calculated by subtracting total costs from total revenue. The discount rate in this example is assumed to be 8%, which is the estimated prime rate or cost of capital. The Net Present Value calculation takes into account the time value of money. Therefore, the discount rate of 8% is applied to profits in years 2 through 5. The net present value profit calculation is gross profit / discount rate.

To arrive at the cumulative Net Present Value, sum the NPV profit for Years 1-5.

Customer Lifetime Value is equal to the cumulative Net Present Value divided by the 100,000 new customers at the beginning of Year 1. Therefore, in this example, the expected LTV of a customer after five years is $128. This means that based on today’s dollars, a customer that is new to the file today is expected to contribute $128 to overhead and profit over the next five years. The overall LTV estimation can then be compared to an acquisition cost that includes revenues from the first purchase minus all variable costs attributable to acquiring the customer (list rental, promotion, postage, cost of goods). Marketers can often justify spending approximately 50% of estimated LTV for a new customer and still maintain a reasonable profit over time. How do I get started? A minimum of two years of historical data is needed to provide meaningful projections for most businesses. We typically begin with a sample of records to gain some insights as to overall LTV, as well as to what the meaningful customer segments might be. As the discovery process becomes more refined, we can extend one or multiple LTV projections across your base, and track the effectiveness of those projections over time. We can continue to fine-tune your LTV analysis as you gather additional history and gain additional insights. As your business changes, the economic climate changes and/or the competitive marketplace changes your LTV formulas and projections will need to be adjusted.

The goal is to use LTV projections to guide your marketing decisions and enhance the total lifetime value of your customer base, thus increasing current and future revenues and profits.For more information on lifetime value analysis, please contact Nykamp Consulting Group today.

SIMPLE ! Right? Right? Right? Ask even dumb questions