CUSTOMER LIFETIME VALUE ANALYSES FOR MINING COMPANIES

Petri Aleksi Virrankoski

Research output: ThesisMaster's Thesis (University Course)

Abstract

Net Present Value (NPV) of customer relationships, also known as customer lifetime value (CLV) is the main topic of this research. In CLV analyses customer’s estimated future cash flows are discounted into present value. As far as author’s knowledge, this type of analyses has not been conducted earlier in Sandvik Mining and Construction. In principle, approach is the same as what it used, for example for product development to estimate pay offs and product lifetime value for development projects. For this analyses excel tool was developed as a part of the research project. The CLV analyses tool is validated by analyzing three customer relationships. CLV analyses of the case customers prove that there are significant differences in relationship value for supplier. Main drivers for CLV are estimated lifetime of the customer relationship, fleet size and type, fleet utilization and customer’s maintenance strategy. Interestingly it was found, that future business for mining customers can be forecasted relatively easily. There is lots of information available of each mining projects and often shared by customers. CLV analyses help an organization to acquire, grow and retain the right customers. Combining similar types of customer relationships to groups it enables group specific offering and strategy implementation. A fundamental target of the customer relationship group strategies is to ensure maximum value increase of total customer base. Customer base grouping should be conducted into two dimensions: 1.value creation according customer purchasing behavior and relationship depth (Match categories), 2.value capture i.e. customer profitability and attractiveness For sales case management CLV tool can be utilized as business impact analyses for Sandvik Mining and Construction. It is typical that large equipment deals will have impact on the business for even decade ahead in form of aftermarket business and potential fleet replacements, in other words lifetime value of customer. Other example, asset productivity agreement is a large investment that generates profits for years ahead. CLV tool provides a framework to build a business case for asset productivity agreement.
Translated title of the contributionCUSTOMER LIFETIME VALUE ANALYSES FOR MINING COMPANIES
Original languageEnglish
Supervisors/Advisors
  • Moser, Peter, Supervisor (internal)
Award date21 Oct 2010
Publication statusPublished - 2010

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