Page 88 - MYM 2016

Engaging Customers in the App World
fig. 3: customer engagement framework in app industry setting: app retention through customer engagement
What are the important metrics to consider?
➤ Purchase Behavior: Customer lifetime value (CLV) has been de ned as “the sum of accumulated cash ows—discounted using the weighted average cost of capital (WACC)—of a customer over his or her entire lifetime with the company.” Yet, com- panies usually compute it for a shorter customer life cycle period as most of the pro t is generated within 3 years. It is a forward-looking metric
which utilizes past purchase behavior to predict the future. e CLV framework can be modeled using three main components: contribution margin, mar- keting cost, and probability of purchase in a given time period. Each of these components will have its own set of drivers/predictors, and each set is esti- mated simultaneously (Kumar & Rajan, 2009).
➤ Incentivized Referrals: An e ective way to measure customer referrals and its impact on prof- itability is customer referral value (CRV). Kumar et al. (2010) de ne CRV as the monetary value associated with the future pro ts given by each referred prospect, discounted to the present value. e two ways in which customers can in uence the company is through referrals and word-of- mouth communication (WOM). Customers can be incentivized to provide referrals and acquire new
customers. For example, an in-app noti cation can be sent to a subscription-based user to refer friends, and if anyone joins the user would get an in-app feature like in-game currency. Other methods
to refer customers are through referral links (via email), coupon codes, and SMS.
➤ Social Media In uence: customer in uence value (CIV) refers to the monetary value of the pro ts associated with the purchases generated by a customer’s social media in uence on other acquired customers and prospects, discounted to present value (Kumar et al., 2013). It is used to measure
the link between an individual’s in uence on social media by WOM to the return on marketing invest- ments by Kumar, et al. (2010). It is vital in today’s hyperconnected world with social media in the form of apps or websites at the heart of it. Social sharing buttons can be integrated into apps to share information at various stages like a game score leader board. Integrating social components like the Facebook ‘Like’ button or comments section can be another way. It is suggested to separately interact with customers and prospects over social media channels as a company. It is important to note that for CRV, customers are extrinsically moti- vated (rewards) but for CIV, it is more intrinsic as they are not monetarily compensated.
88 | MINd YOUr MarkETING OCTOBEr 2016