Components of Developing Customer Base - Tesco

TASK 1

P1. Various components that enable an organization to determine and calculate a customer's lifetime value

In traditional concept, marketing refers to practices which are accomplished by management to attract customers for selling of products and services. Earlier, companies were having their focus on the application of new and important marketing strategies to increase their sales. After a rapid increase in competition, companies are providing their major emphasis on creation of value among their target consumers for products and services to develop the relationship with customers and brand loyalty (Armstrong and et.al, 2015). In retail sector, companies need to analyse that values among customers can also be created by forming an expectations value and acting upon it long with their usage of experience and expectations. TESCO has achieved high growth in the market due to its valuable products and services. In this context, there are various important components determined that enable the organisation to demonstrate and measure customer lifetime value such as:

• Customers Value: It implies to the perception of what a product or service is worth to consumers versus effective possible alternatives. Value will be created by focusing on the processes and systems as much as it is mind-set and culture. In order to improve the customer value, management of TESCO also has emphasis upon improvement of their processes and systems of marketing as well as sales so that they will be able to provide moral focus on customer’s requirements (Goetsch and Davis, 2014). Employees must also recognise what their customers perceive as value and their views towards products of competitors.
• Customer Satisfaction: It implies to the person’s feeling of pleasure and resulting from comparing a perceived value performance of product in accordance with individual’s perception. In order to improve customer’s relationship management, manager of TESCO needs to provide focus of improvement of quality of products and application of effective marketing techniques so that customers will get attracted towards their product. Participation of employees will be taken to get innovative ideas and application of effective management to promote products and services.
• Customer Retention: It implies to practices for sustaining previous customers towards organisation which is important for maintaining sales and profitability in market. In retail sector, customer retention is essential market oriented strategic planning which is performed by organisation to determine customer's value towards products and services (Kumar and Reinartz, 2018).

CLV is important and common matrix that helps in understanding the perceived value of customers towards products and services in comparison with competitors. Value of customers towards TESCO products will come from calculation of costs associated with decisions such as brand, sales personnel, corporate brand and functional image.

Some important components which are used to calculate CLV for TESCO are:

• Average revenue per user: In this, average revenue achieved by organisation from consumer per month (Beckers, Risselada and Verhoef, 2014).
• Cohort analysis: It also involves different factors which carry out some changes in organisation within specified period. This aids sales staff to understand fluctuation in customer preference towards products within specified time duration. Further, CLV measurement for TESCO depends upon factors such as market fluctuations, current trends, seasonality and changes in customer perception as well as requirements.
• Individualized CLV: This implies identification of total value which has been created by organisation in individual customer through various channels such as E commerce, campaigns and other important channels (O'cass and Ngo, 2012).

P2. Benefits of customer lifetime value to the organization

In marketing, CLV is an important metric which represents overall net profits made by company from an individual customer. It is projected to estimate monetary worth to a business after factoring in the value of relationship with a customer over time. In this, CLV is important for TESCO to raise its customer relationship which helps in achievement of high profitability and market share. Further, there are various benefits of customer lifetime values for TESCO as mentioned below:

• Saving financial resources: Findings state that it is cheaper to retain old customers rather than finding new one. When company knows their customers and benefits they seek from products and services, then it can focus upon their resources on these rather than trying to please customers (Ryu, Lee and Gon Kim, 2012). In this context, CLV is beneficial for TESCO as it determined various strategies through which company can retain old customers and reduce its operating cost in finding new customers on social media, newspaper, E-commerce and other websites. However, company should keep database of their previous customer and send emails to provide information about prices and products.
• Better marketing: CLV leads to a marketing which is focused on customers of TESCO. This equates to calculation of benefits of their products rather than features. Through this, sales employees will also get recognition about estimated sales which is required to be fulfilled by providing quality service to customers (Weinstein and Pohlman, 2015). By calculating CLV, company will be able to get understand the perception of individual customer from a particular segment which tends to achieve high value among customers.
• Encouraging brand loyalty: through analysis of perceived values of customers towards products, TESCO will be able to make difference and improvements in their products so that customers requirements will be fulfilled effectively. When customer will get products and service at appropriate quality and prices, there loyalty towards brand will tend to raise and they always prefer to buy as well as promote products of TESCO among their relatives. Further, continuous contact also enables company to embrace or foster its brand recognition and loyalty among customers.
• Customer segmentation: CLV provides competencies to business of TESCO to determined customers groups and distinctive potential customer groups through long term profitability. This aids management to decide whether it is effective to change company's market strategy or not (Aarikka-Stenroos and Jaakkola, 2012). Further, it is also used as early warning system for detecting rates. It identifies the segment in which problems has originated so that actions can be taken to correct the issues.
• Gaining more sales: CLV will also enable retail enterprise to maintain effective relationship with customers through regular contact and maintaining effective relationship with customers. With effective management, company tend to raise satisfaction of customers and will attain high sales in market in comparison with competitors. TESCO should always send them their latest promotion with an effective call to action.
• Time-saving: By making effective concentration on target market and the loyal customers. Company will save time and money by not wasting efforts in promotional practices. This will also intend the TESCO to embrace promotion for reduction high and average customer practices (Nijssen and Frambach, 2013).

However, it can be said that effective customer relationship will embrace TESCO to achieve high share in market. This will help to home base to gain a better share of market and help company to meet the requirements of customers and achieve a better revenue in return of resources it has implemented.

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