Measuring Customer ValueOver the last 20 years, probably the most significant development to impact marketing is the role collected data now plays. Whether in the form of data analytics, statistical modeling or advanced formulas created within Excel, marketers' reliance on numbers and estimations is reshaping how key marketing decisions are made. Of course, the use of quantitative techniques has long been part of the marketing research process, such as information obtained through surveys or collected through sales data. But now, with advances in computer, mobile and Internet technologies, as well as the creation of specialized customer management software, advanced web analytics and other software, the type of data being gathered has dramatically expanded well beyond what used to be obtained with traditional marketing research.

The information now collected is being used in myriad of ways including managing online advertising, selecting new locations for retail stores, and setting optimal price points. Data is also being used to predict whether a customer can be classified as a "good" customer.

As we note in our Managing Customers tutorial, marketers do not treat all customers equally, as some offer more value than others. One commonly employed way to determine whether someone can be classified as a "good" customer is to estimate how profitable he or she will be over his or her lifetime experience with the marketer. Estimating customer lifetime value (CLV) requires significant information about individual customer's purchasing habits and how they interact with the organization. For instance, a retailer can easily track purchases when customers use a shopper card. With this information, they can see what is purchased, how often purchases are made and what methods are used to make the purchase. By plugging this and other data into software that estimates CLV, a marketer can obtain a prediction on whether one customer offers more value than another. For example, a customer whose purchasing patterns do not seem to be overly influenced by price may hold more value than a customer who waits until price discounts are available before making purchases.

While CLV has been a key part of marketing strategy for many years, some have questioned how useful this is in a digital age. As discussed in this CRM Magazine story, one advocate for changing the reliance on CLV comes from Georgia State University marketing professor V. Kumar. He suggests customer value is a multi-dimensional measure and should not be based on profit alone as customers can positively affect a company in other ways. For instance, a customer's positive comments on social media can prove beneficial.

Unfortunately, tracking customers across many contact points is not going to be easy. Thus, fully assessing what customers offer and the value the provide may be challenging. However, the fact there is now discussion of changing how customer value is determined is a positive sign and marketers should at least give this serious thought.

While the announcement regarding the arrest of FIFA executives is certainly a major news story, it also has important implication for marketing. Sports are big business for brands. And when negative publicity enters a sport, brands supporting the sport will often respond by quickly pulling their sponsorship. For example, nearly all brands that supported golfer Tiger Woods pulled their sponsorship when his infidelity issues came to light in 2009.

No one knows what will happen in the FIFA situation, but any brand associated with FIFA must be worried. The sport is so huge that any evidence of illegal activity by this group may come back to haunt a brand unless they make a quick decision to severe ties. But a company that makes a hasty decision to remove their support of FIFA could face an even greater backlash if the charges against FIFA executives do not hold. So right now, most brands associated with FIFA are taking a wait-and-see approach before making a decision.

As discussed in this Advertising Age story, major brands, including Budweiser, McDonald's and Allstate, are not making rash judgments regarding the situation. Through their public relations departments, they all are indicating their awareness of the issue but are not ready to make any decision regarding their association with FIFA.  (It is interesting to note that Nike also has a stake in this though it is unclear exactly what the implications may be for them.)

As things evolve over the next few weeks, if the case against the FIFA executives becomes stronger, expect to see brands pull their sponsorship. However, also expect that once things settle down nearly all of these brands will return, likely in time for the 2018 World Cup.

One of the most difficult challenges a marketing organization faces is how to regrow a brand that has appeared to reach the Maturity stage of the Product Life Cycle. We have touched on this many times including our recent post dealing with the beverage industry and our 2014 post of how marketers were trying to revive the Smith Brothers brand of cough drops.

However, the problems associated with re-growing a leading brand become even more difficult when the company behind the brand has devoted little attention to it for a significant period. When this happens, if there is value in the market, competitors will take notice and will invariably take advantage by marketing their own offerings. Once the former market leader figures out they need to pay more attention to their product, competitors may have assumed a commanding position that will be difficult for the original market leader to recover.

An example of this can be found in this story from the Washington Post. It discusses how MapQuest, a once dominate online resource for providing maps for travelers, has fallen on hard times and is now struggling to reinvent itself. The problem befallen MapQuest are nearly textbook in terms of how a brand loses a dominate market position. During the dotcom frenzy of the late 1990s, MapQuest was purchased by AOL, which invested little in the product over the next 10 or so years. Competitors, most notably Google, then came in with superior offerings leaving MapQuest as a small, bit player.

Yet, things may not be totally dead at MapQuest. Understanding the brand is still widely recognized, the company is now making an effort to improve their product. They have a long way to go, but with AOL now being part of Verizon, maybe MapQuest will once again be a player in the mapping market.

Most organizations believe a key measure of marketing success is found with how many customers return time and time again to purchase their product. If we look at our definition of Marketing, the idea that success can be measured in repeat purchasing is certainly supported when we say an important goal of marketing is to "maintain satisfying relationships" with customers.

Yet in a few industries, the idea of developing loyalty to a certain product provider may not be what customers are looking for. For these customers, if they had their druthers, they would prefer not to continue spending money on some products. For instance, homeowners may not want to deal with a mortgage company for any longer than is needed. The same can be said about companies offering online user protection services.

While it is easy to see how customers in these industries would prefer not to buy, things get somewhat murkier when it comes to the pharmaceutical industry. Drug companies thrive on developing products that address specific medical needs and they are especially attracted to health issues that persist for many years. In fact, a cynical person would say there is no incentive for a pharmaceutical company to find a cure to a chronic problem as this could significantly impact a major revenue source. But what if a cure is found? What happens to marketing?

This story from Pharmaceutical Executive examines what marketers may face if a cure is discovered or if a treatment has become routine and little profit can be realized. This story suggests ways marketers can take advantage of this situation. For instance, if a cure for a condition is found, marketers should tout their role in lessening or eradicating the health issue. This helps build customer awareness of the company and will help with marketing of other products.

Of course, depending on the type of health issue that is no longer considered a major problem, marketers may still be confronted with significant fallout. Unless the company has many strong products in the pipeline, curing a health problem can lead to significant financial ramifications for the organization. Thus, the lesson here is that organizations in almost all industries must continually develop new products because what is bringing in the big money today may not be something to be counted on in the long-term.

It is pretty amazing how far e-commerce has advanced into the last 10 or so years. Ten years ago online purchasing was pretty much still in its infancy. Not only did online buying represent less than three percent of all retail sales, the methods used by customers to place orders and the methods used by online retailers to fill orders, now seem downright ancient. Back then, customers would shop around on websites, often for an extended period, until they found what they wanted. Also back then when an order was placed it was common for the online seller to say it would take five or more days for the customer to receive the order. And back then one-stop shopping for a wide-range of products was rare. Online sellers just did not have the means for supplying tens-of-thousands of different products.

But over the last ten years, almost everything about online retailing has changed. Today, websites use sophisticated personalization software to make suggestions as to what shoppers are searching for online. They even use advertising methods, dubbed re-marketing, to track customers as they visit different websites and continue to make suggestions through highly targeted advertising. Today, online sellers, including Amazon and Walmart, guarantee delivery within two days. And today, because of an increased focus on the importance of distribution and warehousing, many web retailers sell an astonishing number of products.

So it is not surprising that innovations taking place in online shopping continue at a staggering rate. For instance, consider Amazon's latest development. Back in November 2014, Amazon introduced a device called Echo that is capable of responding to voice commands. Initially, its functions were directed to playing music, providing answers to questions such as:"What is the weather like today?" and a few other things. But as discussed in this Time story, Amazon has now equipped their Echo product with the ability for customers to order products by simply speaking the words. This clearly is the next step in online shopping. It is easy to see the day when someone walks around their kitchen, looks into cabinets and the refrigerator, and just talks the products that are needed, and within a few hours a friendly delivery person hands over the order.  While such technology will take some time to trickle down to small online sellers, there is no doubt this is the future of online ordering, if not all retail ordering.

(Friendly warning: The video included with this post, which explains the features of Echo, appears to have been produced before the voice ordering capability was added.  However, for anyone, who has watched too many sci-fi movies depicting lives being taken over by some unknown force, this video may seem a bit creepy!)