Kansai Digital Phone Case

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Do you really know your customers?  In recent years, managers have come to realize the importance of measuring and maximizing the lifetime value of individual customers - and with good reason.  After all, why spend valuable marketing dollars to attract and retain minimally profitable customers when you can spend the same amount - or less - to capture and cultivate more profitable ones? The new model is customer lifetime value. This customer -centric strategy holds tremendous implications for managing customers for profitability. By understanding the principals, optimizing the use of databases, implementing best industry practices, and deploying the right marketing tools, you can make significant changes that will maximize your customer value, now and into the future. Through a dynamic combination of real-world case studies, hands-on individual and group exercises, and facilitated discussion, you will get the tools and techniques you need to implement cutting-edge marketing methodologies in combination with superior customer management strategies - all designed to help your firm maximize growth and profitability.

Brief Summary
Ted Katagi, marketing strategy manager of Kansai Digital Phone (KDP), utilizes customer lifetime value as a key metric to prioritize initiatives in an emergency plan to turn around the company. KDP is a regional phone company in Japan with less than stellar performance. Katagi is sent from the U.S. partner, Airtouch (later Vodafone), to assemble a team which was called ”A-sen” to design and implement a plan that improves company to performance. Katagi must quickly prioritize actions and then assess the expected economic impact. Learning Objective

The focal point of our paper is to identify techniques and use of customer lifetime value in Kansai Digital Phone. Subjects covered
Change management; Customer relationships; Customer satisfaction; Customers; International management; Priorities; Strategy formulation Settings
 Industry Setting: Mobile phone Geographic
Setting: Japan
Gross Revenues: 56 billion yen revenues

All sales of wireless service in Japan were completed via indirect channels. (see Exhibit 1) Distribution channels
1) Small agent branded shops
Wireless providers contracted with small agent retailers to sell their products in small branded shops, which had licenses of use of service and agreement on very loose standards.

2) Volume retailers
* Big-box electronic retailers
* Small electronic shops
Volume retailers sold handsets among their many other products and sold service agreements with wireless providers 3) Trading companies
Japan`s specific channels that represented largest proportion of sales. In this case, companies agreed to be responsible for a fixed sales volume and were invested in wireless provider. In order to fulfill the agreed volume a month, trading companies had their own agent programs which created a third layer of agents.

As a matter of fact, complex landscape distribution channel left wireless companies very little influence over the buying experience of customers.

Japanese customers in general tended to jump to newer technology sooner than in other nations. Part of the cause of this was demographics of wireless users, who were business users, who searched for better functionality, longer battery lives, and very young segment of users, who were following for a trend and fashion. BUT first of all, the functionality wasn’t the main reason why people used phones, as their customers were below 35, they cared more about the appearance of the phone, and later about functionality.

Competitors (see Exhibit 2)
1994 – DoCoMo, Cellular, Tu-Ka and KDP
DoCoMo had 65% of the market, because the government was its primary shareholders, and had monopoly-like advantages. Competition or customers centered on network coverage, the hardware used to...
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