7.2: Project—Creating Customer Portfolios The company to use is DTV In this assignment, you will create two customer portfolios for your own organization or for one you have enough information about in order to make sensible predictions relating to custom

Retaining the customers if very important for each and every organization as it is much cheaper to retain a customer than acquiring a new customer. The quality of profit earned from a customer can easily be described the Customer Lifetime Value. It represents the profit that the company will acquire from a customer by selling a service or product to them. In this paper we will take a look at the calculation of the CLV and also take a look at the power core of the organization and how it affects the CLV of the organization. For this paper the organization selected is DIRECTV.

CLV Calculation:

Using the data from the financial statements of DIRECTV for the year 2013 we have following observations:

1.      The company enjoys a very high retention rate of 98.5%. Only 1.5% customers leave the subscription of the organization

2.      The total customer base for the organization for the year 2012-2013 was 20.253 million customers

3.      The total revenues for the company = $24,676 million

4.      Total operating cost in selling services to the customers = $13,383 million

5.      Subscriber acquisition costs = $2,642 million

6.      Upgrade and retention costs = $1,350 million

Using the above data the total costs for selling subscriptions to the customers can be calculated as below:

Total Costs = $13,383 + $2,642 + $1,350 = $17,375 million

Total Revenues generated from selling services = $24,676 million

Hence gross profit for all the customers = $7,301 million

Hence CLV = $7,301/20.253 = $364

Hence for each loyal customer that stays with the company, the company would earn revenue of $364 per year.

Identifying the Power Core:

DirectTV is a very huge organization given the huge amount of customer base and the high retention rates it has to boast for. There are many strengths of the organization but the main strength of the organization comes from the customer base of the organization. Having said that it is quite obvious that the customer base has come from the marketing strategies of the company. Hence the power core of the organization can be thought of as the marketing arm of the company. The marketing Arm of the company ensures a very high retention rate. In the television broadcast business maintaining a high retention rate is very tough task but the company has the numbers to prove that their service and the marketing has achieved the task. For the year of 2013 the attrition rate was just 1.5% and for the year prior to that it was 1.53%. As it can be seen that they have managed to reduce the attrition rate and hence improve their retention rates.

Besides marketing arm of the company there are other power silos that has to be dealt on a daily basis. These are described as below:

Information Technology: The customers will not be only pacified by the good marketing of the company. They must receive a good broadcast service also to enjoy the subscription. It is here where the Information technology plays a very important role and something that as an employee of the company I have to deal on a daily basis whenever a customer complains

Product: the company offers very lucrative offers for subscriptions which obviously lure customers towards to the company. This coupled with the good customer service and a very good technological service ensures that the customers are happy. I have to deal with the products department on a daily basis as more and more customers come to company for subscription.

References

DirectTV, 2014. DirectTV Annual Report 2012-2013. Retrieved from http://investor.directv.com/files/doc_financials/annual/DIRECTV%202013%20Annual%20Report.pdf Retrieved on April 15, 2014