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Peer Review

Financial Value of Customer Satisfaction: Using a Lifetime Value Calculator

by Michelle Kunz


Overall Numeric Rating:

5 stars
Content Quality: 5 stars
Effectiveness: 5 stars
Ease of Use: 4.75 stars
Reviewed: Feb 21, 2013 by Business Editorial Board
Overview: This is an interactive online calculator for estimating the value that customer satisfaction and retention brings to a company. The following variables are used: the value and frequency of purchase, annual purchase rate, and referral information. The activity should take about 10 minutes, and provides a nice, interactive demonstration of the lifetime value of a customer to a company. This is a useful tool for introducing students to the concept that customer loyalty and patronage can be very financially rewarding for a company.
Type of Material: Assignment
Recommended Uses: In-class exercise
Technical Requirements: Browser only
Identify Major Learning Goals: Students will gain an understanding of the value of customer satisfaction and retention using examples of goods or services they regularly purchase.
Target Student Population: This tool can be easily added to an undergraduate course such as the Principles of Marketing, Marketing and Selling, Retailing, and Consumer Behavior.
Prerequisite Knowledge or Skills: Basic marketing principles

Evaluation and Observation

Content Quality

Rating: 5 stars
Strengths: This tool is excellent for use in the classroom because it can be used without requiring an extensive assignment or outside reading. Students quickly see a dollar figure at the bottom of the calculator tool and this immediately brings home the importance of financial rewards from repeat customers over a long period of time. It can be used in a variety of classes.
Concerns: None.

Potential Effectiveness as a Teaching Tool

Rating: 5 stars
Strengths: This tool is very effective since it is a very quick way to demonstrate the value that customer loyalty and continued patronage provide a company based on simple student examples. It is the easiest lifetime value calculation seen by the reviewer to use. It covers a very important marketing concept.
Concerns: It is not meant to build progressively on the concept of customer value and retention.

Ease of Use for Both Students and Faculty

Rating: 4.75 stars
Strengths: This tool is highly interactive and easy to use. In addition, variables can be changed to quickly see the effects. For example, students can experiment by plugging in a different number of customer referrals to determine the estimated overall effects on gross sales. The author has provided good tips on how to use it effectively.
Concerns: The module links to an external site that does not provide instructions on what should be filled in and what is calculated.