Mize Company - Expecting Changes in Terms of Customer Gain, Churn Rate, and Retention Rates - Essay Example

TASK 2: MARKETING By Task 2: Marketing a. Identify and evaluate the key metrics that are relevantto your chosen organizations main marketing operational areas and the seminar audience. The following are the key metrics that are relatable to the company: New Customer gain: It is obtained using the formula, new customer gain = number of customers at the end of the time period- number of customers at the start of the time period (Allio, 2006). This metric is key to the marketing team and entails doing analytics that can be used to nullify the notion that marketing does ‘not do number.’ In relation to Alnahdi group – Mize Company, this metric can be used effectively in finding the number of customers that the company has gained over a given period, say six months. The value can be gotten taking by the number of customers as at January 2013 and subtracting the number of customers as at January 2012, in order to find the customer gain in the time period of 2012-2013 ( Anon, 2006) Churn Rate” This metric is given as a ratio between the number of customers a business losses over a specified period, over the number of customers that were there at the beginning of the start period. In short form, Gburn= Gt/Cat. Where; gt= the number of customers a business lost over the time period  Cat= the number of active clients at the beginning of the period  In relation to the Alnahdi group – Mize Company, the churn rate can be used appropriately in business marketing analytics in order to find a figure that can depict how the business is performing in regard its customer value over a given time. Retention Rate: This is defined as the ratio of the number of active customers at the end of the period to the number of clients at the start of the period time. In shortened form, it can be written as: Retention Rate = Ca/Cat  where, Ca= the number of live clients at the end of the period  Cat= the number of active clients at the start of the period In relation to the Alnahdi group – Mize Company, the ratio would show how active the company’s customers have grown or reduced from the start of the period to its end. For instance, the ratio could be calculated by finding the number of active customers as at July 2013 and then dividing it by the number of active customers as at July 2012, in order to find the retention rate for the time period from July 2013- July 2014. Q2. Using the chosen key metrics, analyze relevant data used within your chosen organizations key marketing operational areas from a marketer’s perspective. New Customer gain As outlined above, this metric is used to find the number of customers that an organization gains within a certain period. There are various reasons that can make the number of customers for a given organization to either increase or decrease. These factors vary from customer experience, quality of products an organization offers, the additional benefits a particular group gives its customers and so forth. This metric can be analyzed in regard to the Alnahdi group – Mize Company in order to calculate the increment of the number of customers that can be associated with any of the above-mentioned factors (Carter, 2011). Taking an example, in the month of November 2014, the number of customers that the company (Alnahdi group – Mize) had were approximately 10005. Similarly, from the data taken from the enterprise’s data publish as at January 2015 the number of customers was 15004. Therefore, the company’s customer gain can be gotten as the difference between the two values which is 15004-10005 = 5000. This means that the number of customers for the company increased by 5000 within the period of Nov 2014- January 2015. From a marketer’s perspective, I can conclusively affirm that the company’s marketing strategies worked effectively since it garnered five thousand new customers to the company, within that span of time (Frösén, Tikkanen, Jaakkola & Vassinen, 2011). Churn Rate- As stated from above, the churn rate is a ratio that shows the rate at which an organization loses its customers considering the number of customers it loses as compared to the number of customers it had at the beginning of the period being considered. The number of customers that an organization loses highly depends on factors such as the prices set by the organization. Further, the numbers also depend on the customer loyalty that the organization creates through various means such as offering of constant quality services (Krishnan, 2013). For example, the number of customers that Alnahdi group – Mize company in May 2012 were 4005. In the contrary to the above, the number of customers the company had in July 2012 was 3009. Therefore, to get the churn rate, we get the difference between the two values and then divide by the original number of customers which is 4005. Mathematically, it is calculated as; The churn rate = (4005-3009)/4005 = 0.2487. The figure means that the rate at which the organization lost its customers is 0.2487 * 100 = 24.87%, during that period. This unfortunate happening can be attributed to any of the factors mentioned above. Retention rate- As mentioned from above, the retention rate shows the ratio of the active customers that a company got at the end of the period considered in relation to the number of active customers the organization had at the beginning of the period. Much as an organization may have a certain number of customers, they may not necessarily be active since there are various factors that determine the activity of customers. Taking an example from the data published by Alnahdi group – Mize company’s data publish, the number of customers that were active in May 2012 were 3985, out of the 4005. Similarly, the number of active customers in July 2012 were 3995. Therefore, the retention rate ca be gotten by dividing the number of active customers as at July 2012 over the respective number of active customers in July. Mathematically, it can be calculated as; Retention rate = 3995/3985 = 1.0025. Therefore, the retention rate for the Alnahdi group – Mize Company for that period is 1.0025. This means that the company retained 1.0025 *100 = 100.25% of its customers in that period. Dashboard of the metrics used The following table shows the anticipated numbers of the Alnahdi group – Mize customers and active customers in the next three years. Table 1 Number of customers Number of active customers 2015 2016 2017 2015 2016 2017 January 5006 7500 7900 4985 4982 7700 February 5500 7400 7805 5000 7500 7645 March 5985 7602 8100 5800 7452 7945 April 6000 7600 8215 5870 7500 8100 May 6050 7541 8300 5500 7214 8145 June 6321 7412 8415 6000 7215 8215 July 6400 7600 8512 6254 7413 8312 August 6500 7800 8522 6345 7600 8100 September 4514 7896 8412 6452 7600 7900 October 7100 8100 8145 6100 7485 8025 November 7500 7414 8452 7400 7210 8314 December 7150 8500 8521 7000 8400 8210 From the above data, the following table of the for the customer gain from the year is obtained. From the table, the pie chart that follows was created. Year Customer gain 2015 2144 2016 1000 2017 621 As seen from above pie chart, the new customer gain is likely to reduce over time, from 2015 to 2016. The trend can be attributed to several factors. First, the number of customers are seen to be increasing more than it is reducing over the years 2015, 2016 and 2017. In the market, there comes a period when the number of customers that an organization gain becomes quite constant because of reaching peaks. The factor that’s attributed to the rise of the number of customers that Alnahdi group – Mize gains over the period is the increase in the marketing strategies over the time periods (Carter, 2011). As time goes by, the marketing strategies that the company employs from its marketing department increase in the level of complexity and technique. Technology, risk assessment, and continuous business improvements are some of the factors that will lead to increment in the customer gain over the years. As a result the difference between customers at the end of time periods and beginning of time periods will be lessening as time goes by. The element in terms of new customer gain that’s likely to be observed is the consistency in the value of new customer gain starting from the year 2015 to 2016. This follows from the fact that the marketing strategy of the company undergoes positive revolution, as outlined from above. Since there are more and more customers being attracted, there comes a time when the number of customers being gained attains a constant value, as seen from the data, give from the table 1. The table below shows the customer loss that Alnahdi group – Mize Company expects from the year 2015 to the year 2017. The proceeding bar graph illustrates the churn rate, which as mentioned before, shows the rate at which an organization loses customers within a certain period (Eastwood, 2005). year Customer loss 2015 492 2016 215 2017 -512 From the bar graph shown above, the churn rate is expected to decrease progressively from the year 2015 to 2017. As a matter of fact, it is seen from the bar graph that there is a negative value in the year 2017. This insinuates that there will be no positive loss of customers in 2017. Contrary to this, it is expected that there will be a positive customer gain instead. This can be attributed to the fact that after careful evaluation of the market trends, the marketing department of the Alnahdi group – Mize, shall have done thorough and considerate marketing operations, that will earn the company more and more customers until the loss of customers will cease (Eastwood, 2005). Additionally, improvement of the company’s operations in terms of product quality, service, and customer experience would have increased, leading to loss of lesser and lesser customers. The trend that’s expected to be observed over the next three years is the rampant increase of marketing strategies aimed at increasing customer gain rather than reducing customer loss. This is attributed to the fact that as seen from Table 1, there will be a consistent reduction in the number of customers lost over time. Consequently, there will be a need to embark more on the marketing operations that will lead to gaining more customers rather that reduction of customer loss. The table below shows the difference between the number of active customers at the start of the period and the number of active customers at the end of the period, distributed from 2015-2017. The bar graph that follows represents the data in terms of the retention rate. year Active customers at the end of period 2015 2015 2016 3418 2017 510 From the graph above, it appears that Alnahdi group – Mize Company will have inconsistency in terms of retention rate from the year 2015 to 2017. As the bar graph indicates, the retention rate in the year 2016 will be highest, followed by the 2015 retention rate and the 2017 retention rate. The random values of retention rate can be attributed to the fact that there is a likelihood that the number of customers that are active varies because of the change in terms of needs, preferences, and tastes. There can be negative changes of preferences of the clients and hence, reduction in their activity. These changes lead to a reduction of the retention rate that Alnahdi group – Mize Company expects (Frösén, Tikkanen, Jaakkola & Vassinen, 2011). The trend that’s expected to happen in the next three years is the increment in the product diversity of the company. The increment shall suit the customer needs and engage them in order increase the value of the retention rate. In conclusion, the Alnahdi group – Mize Company expects different changes in terms of the three metrics i.e. new customer gain, churn rate, and retention rates. The changes in these metrics depend on various factors within the company, and the marketing strategies to be employed will depend on how well the company uses the above-discussed marketing analytics. References Allio, M. (2006) Metrics that matter: seven guidelines for better performance measurement. Handbook of Business Strategy, Vol7(1), pp255–263. Emerald http://dx.doi.org/10.1108/10775730610618918 Anon (2006) History lessons: do the math: Hoover. Management Today, January, p15. Ebsco http://search.ebscohost.com/login.aspx?direct=true&db=bch&AN=19493119&site=ehost-live Eastwood, G. (2005) Giving too much away? Marketing Week, 17 February, pp41-42. Ebsco http://search.ebscohost.com/login.aspx?direct=true&db=bch&AN=19493119&site=ehost-live Carter, M. (2010) How to…market at board level. The Marketer, September, pp34-37. Making marketing a board level concern is not only your ambition but your duty – value for money is crucial to your organisation’s post-recession recovery. So how should marketers use consulting services to measure marketing effectiveness? http://www.themarketer.co.uk/archives/how-to/market-at-board-level/ Frösén,J., Tikkanen, H., Jaakkola, M. and Vassinen, A. (2013) Marketing performance assessment systems and the business context. European Journal of Marketing, Vol47(/6) , pp715–737. Emerald http://dx.doi.org/10.1108/03090561311306688 Krishnan, V., Sullivan, U.Y., Groza, M.D. and Aurand, T.W. (2013) The brand recall index: a metric for assessing value. Journal of Consumer Marketing, Vol30(5), pp415-426. Emerald http://dx.doi.org/10.1108/JCM-02-2013-0464 Read More