Spike Lee, Customer Lifetime Value and Brand Equity
The Knicks suddenly have a customer management issue with their highest profile fan. All Spike Lee wants is to use the employee entrance at Madison Square Garden. Really, it's all he knows. A long time New York Knicks superfan, filmmaker Lee has been using it for 28 years, he explained this morning on ESPN. But suddenly, at last night's game, they wouldn't let him -- security told him to use a different entrance. You'd think that would be that, but it's not. Lee is now full-on feuding with the Knicks and team owner James Dolan over his treatment. All of this comes after an incident at Monday night's game, when video surfaced that seemed to show Lee being denied entry into the game. Fans questioned how the franchise could treat its biggest fan with such disrespect. I'm not going to comment on the right or wrong of this. I don't really know. Of course, that isn't stopping most folks. This is an opportunity to pile on James Dolan. Celebrities and ex-athletes versus the owner of a New York team that has struggled for decades. The narrative is so predictable as to be uninteresting. But the narrative is important from a marketing perspective. First — a marketing concept. A core concept in marketing is customer lifetime value. The big idea is that customers provide cash flows over time and can be viewed and managed as assets. In other words, firms can predict what customers are worth over the long-term and can manage customers based on that value. What is Spike Lee worth? I'll keep it simple (no inflation, no discounting, no attrition rate, no season ticket discount, no playoff tickets, etc...). A quick search reveals that Knicks floor seats cost about $3,500. Lets say he buys 2 tickets per game. 41 games x 2 tickets x $3,500 = $287,000 per season. If he has been doing this for 28 years then he has spent about $8 million. And if he was going to do it for 15 to 20 more years we have another $5 million or so. CLV calculations are instructive ($13 million should afford choice of entry?) and useful in many contexts (how much should the company pay to repair the relationship?). But in this case, CLV is sort of limited. Spike Lee has the platform to amplify his complaints. The word-of-mouth impact of a story like this would be brutal for most companies. Typically, the company loses not just the $5 million future value of Spike Lee but also takes a hit in terms of other customers that are influenced. All that being said, I'm not sure that the Knicks take much of a hit. The Knicks have an amazingly strong brand (based largely on location). If the Knicks win, they could ban Spike Lee from the arena with limited repercussions (I know, it is a big if). The problem for the Knicks is more of a problem for the owner. When does the publicity become so negative that either Dolan or the league has had enough?