Fisher Price Gift Chain

Propensity Modelling is a technique to evaluate Customer characteristics and behaviour. To recommend next product to purchase, based on past
purchases and purchases by similar segments.

Propensity Modelling and Datamining can also predict and identify customers who are likely to stay loyal for long duration. Fisher Price has
categorised its customers as below.

The Silver customers stay loyal for 3 years. Gold between 3 to 5 years. Platinum for over 5 years. From the two tables below calculate for which
group of customers is the suggested campaign viable.

Measuring effectiveness of an online campaign

Customer Acquisition Costs

Results
REACH of E- 21,700,000 Ad impression Number of people viewing the
communication Campaign
Attraction efficiency Rs. 700,000 Media cost
0.23% Click through rate
Rs. 32.26 Cost per mile/thousand (CPM/CPT)
Web site VISITS 50,000 Clicks ( approx.. equivalent to visitors)
Rs. 14.00 Cost per click(CPC)
Site conversion efficiency 33.40% Conversion rate ( click to quote)
LEADS or opportunities 16,700 Opportunity response
generated Rs. 41.92 Cost per opportunity (CPO)
Lead conversion efficiency 10.60% Conversion rate ( opportunity to sale)
Number of OUTCOMES 1770 Sales
delivered Rs. 395.58 Cost per sale ( CPS)
 Life Time Value Model for customer base for current system
Year 1 Year 2 Year 3 Year 4 Year 5
A Customers 100,000 50,000 27,500 16,500 10,725

B Retainers 50% 55% 60% 65% 70%

C Sale per annum Rs. 1000 Rs.1200 Rs. 1400 Rs. 1600 Rs. 1800

D Total sales Rs.100,000,000 Rs. 60,000,000 Rs. 38,500,000 Rs. 26,400,000 Rs. 19,300,000

E Net profit (@ Rs.2,000,000 Rs. 1,200,000 Rs. 770,000 Rs. 528,000 Rs. 386,000
20% margin)
F Discount rate 1 .86 .7396 .636 .547

G NPV contribution Rs. 2,000,0000 Rs. 1, 032,0000 Rs. 569,4920 Rs. 335,8080 Rs. 211,1967
H Cumulative NPV Rs.2,000,0000 Rs. 30,320,000 Rs. 36,014,920 Rs. 39,373,000 Rs. 41,484,967
contribution
I Life time value at Rs.200 Rs. 303 Rs. 360 Rs. 394 Rs. 415
net present value