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Customer Lifetime Value - Homebase

University: Icon College of Technology and Management

  • Unit No: 5
  • Level: Undergraduate/College
  • Pages: 11 / Words 2773
  • Paper Type: Assignment
  • Course Code: L/508/0597
  • Downloads: 438
Question :

The project scenario is based on marketing manager who wants to increase profits by introducing customer lifetime value matrix. It will help company in understanding relationship with each customer by analyzing their contribution.

  • To understand the concept of customer lifetime value and analyze various factors that impact it.
  • Evaluation of different customer segments and identify scope for customer value creation at Homebase.
  • Determine techniques and methods used for increasing customer lifetime value at Homebase.
Answer :
Organization Selected : Homebase


Customer value management can be defined as a tool which is optimised for measuring the perception and view of consumer in context of perceived value for the capital delivered to the competitor's client. It can be considered as an art of gaining value of consumer individually. Majorly, it is planned through organisation to address the major practices which influence the organisation's profitability. One of the major feature of this aspect is that this can aid in reviving the consumer value, aiming on scarce resource to achieve a competitive edge. Setting lifetime value of consumer, this is fundamental for an organisation as it can aid in administration in undertaking appropriate decision. This report will study the Homebase, an organisation which is British home development retailer as well as a garden centre across entire UL and Republic of Ireland (Adam, 2013). Major components is to measure the consumer's lifetime value along with its various benefits which is outlined under this assignment. Further, major factors that impact consumer lifetime value is also written under this report. In regard of this, several sort of market segmentation and models of decision making is reviewed along with techniques of consumer loyalty and relationship.


P1. Various components to determine customer's lifetime value

In the present business environment, consumer relationship play vital role in the increment of firm's profit. An organisation generates high benefits amount when consumer make more decision of purchase or buy services in bulk. Loyal consumer can be considered as the value source for a firm but are scarce. So, maximum practices should be coordinate through the enterprise to emphasise the value of enterprise among consumer along with evolving better company strategies to allocate same objectives and goals of organisation.

Homebase is a British home development supermarket and stores of garden centre in United Kingdom and Ireland. Various components to determine customer's lifetime value, the company has optimise SMS service technique to their target market (Bosworth, 2012). Organisation operates and perform several practices to deliver more effective and suitable service to their potential consumer and service user to generate high profit amount and carry out products as per their demand. Customer lifetime value concept is optimised through the organisation in regard of managing and valuing better consumer relations. In regard to it, CLV can be referred as a periodic value that affirms that 12 month relationship estimation along with its value i.e. £ x. With it, organisation can retain their consumer for more longer period as well as can result in emphasising the productivity and benefits of organisation. Major organisation aim is behind opting this is to maintain and create more effective consumer relationship that assist enterprise in generating higher benefits amount in comparison of competitors (Castells, 2011). Here are mentioned the major elements opted through Homebase to measure CLV:

  • Present Value: It is the components that highlight the consumer perception in relation to services and organisational product. This signifies a deduction value that presents flow of cash get through the organisation of consumer. Further, this covers more money and time value that can assists in retaining clients for a longer period of time. A periodic value is involving in this.
  • Mathematical Formula: As per this, the consumer relationship value is considered as the monetary cost i.e. set with the optimisation of mathematical techniques and tool. A formula is used for the CLV that refer to the total firm revenues eliminated through period when the customer's joined the company. This signifies several encouragement practices of organisation generated through consumer. Further organisation perform several encourage and confidence boosting procedure for increasing the organisation's benefits. It is effective and useful elements as it can aid enterprise in evaluating CLV that support the enterprise in retaining service user for longer time period.
  • Consumer's Loyalty: CLV hugely rely on the consumer's loyalty. With the assistance of this element, organisation can retain their consumer for more longer period of time. Customer loyalty carries out sustainability of firm in marketplace for longer time period. Further, this enhance the consumer lifetime value (Hawkins, 2013). This deliver a competitive edge to enterprise and decrease the company's benefits amount.
  • Individualised CLV: The organisation calculate customer lifetime value on a wide concept. If this method isn't enough successful, this set the individual value then this signify the presentation in regard of consumer value.
  • Cohort Evaluation: This indicate an individual group who share some traits. It presents several condition which influence customer lifetime value to build and manage more better consumer relations.

Above mentioned activities are the main elements which aid organisation in creating large and more strong consumer base for organisation. This also increase the company's benefits and at the same time make certain the survival of organisation.

P2. Benefits of customer lifetime value to an enterprise

As customer lifetime value deliver huge benefits amount to an organisation, it can be considered the major cause of attention delivery of large number of consumer. With it, organisation can create a large and strong consumer base by which firm can generate large profit amount (Hennessy and McCleary, 2011). Further, CLV concept aid the organisation in creating more positive market environment that help in attracting consumer number toward the offering of company. It will also ensure he organisation's survival in trade and deliver several long term advantages to enterprise. Some of the benefits for accommodating CLV procedure are mentioned under:

  • Improve goodwill of organisation in market: consumer value and relationship concept assist in maintaining and building a positive portrayal of organisation in marketplace. This can enhance the goodwill of enterprise and attract large customer number. These practices help in increasing the enterprise benefits and deliver Homebase an opportunity to serve more consumer number. This emphasise the share of market in company and make certain a longer survival period of organisation.
  • Increase the benefits and ascertain company's growth: technology has vital tole in the consumer relationship value management. This is very fundamental which help in creasing and updating new technologies which should be opted through organisation to provide their consumer. Homebase embarked should utilise more effective technologies in regard of managing effective services and offer better services to their consumer. Online marketing concept is opted through enterprise that encourage innovative ideas among service user (Hollensen, 2015). Further, this make certain effective business operations expansion that increase the enterprise's benefits.
  • Financial growth: major customer lifetime value feature is that this can assist organisation to maintain and create a healthy consumer relationship. This ascertain the dedication and loyalty of customer which can aid the organisation to retain them for a longer time period. These elements indicates whether suitable funds are invested in the manufacturing procedure and business operations. Further, it can aid in development of production procedure which can provide in satiate demands of consumer and it can result in financial organisational growth.
  • Assist in Retaining Consumer: Consumer are also considered as the major benefit maker of an organisation. These are the major entity which make the purchase decision to accomplish their basic requirements. Customer lifetime value management concept aid the manager in understanding the major feature that should be there in service to attract huge consumer amount as well as satisfying their demand (Kerzner and Kerzner, 2017). It can aid enterprise in consumer retention for longer time period and deliver competitive edge to organisation.

Hence, it can affirm that customer lifetime value managed can be optimised to identify organisation's future expansion opportunities and healthy relationship management with their consumer. Further, the concept can aid the organisation in gathering huge relevant information associated with their service user. Whole procedure aid the company's manager in undertaking the major decision and emphasising the organisational benefits.

P3. Factors influencing the customer lifetime value

Customer lifetime value is a wide concept that is affected by large components and sometime, it can influence an organisation's profitability in more negative manner. Major CLV concept include the determination of life of consumer with the organisation offering and recognising the cost that a person is prepared to pay for product of firm. Homebase opt the consumer value management technique to emphasise the company's benefits and number of consumer. There are numerous factors which are existing that can influence the customer lifetime value after identification and reviewing those element's negative influence those components which can be minimised (Kim and et. al., 2015). Factors which influence upon consumer value administration which are discussed as below:

  • Dearth of Professionals: In prospect presents the expertise lack in order to carry out the calculations associated with the value of consumer relationship. Non professional availability can result in inappropriate calculations as well as also affect the process of decision making that can negatively influence the company's profit.
  • Low engagement in categories of product: Wrong measurement of customer lifetime value can adversely impact on the services and product quality in contrast of consumer standard. This ca reduce the share of market from organisation and this can lead company toward more complex survival in trade. Further, dearth of qualified working staff create more barrier in entire operations of business in more efficient and effective manner.
  • Complex to calculate: It is complex to calculate the consumer lifetime value for Homebase in absence of a professional in this sector. Further, numerous components are there that influence the process of decision making of organisation in both negative and positive manner (Kotler, 2015). Further, proper CLV calculation is really complicated cause of the alternation which take place in the business environment.
  • Offline and Online Channels: Numerous CLV techniques in the recent era are able to assist an organisation in skill enhancement among worker to make certain whether firm can survive among the competitive environment of business. Various offline and online development are undertaken for process of decision making by the organisation that can carry out optimum utilisation of organisational resources.
  • Organisation Size: Large organisation is entertained from large and strong consumer base but this is become very complex for the CLV calculation. Homebase is an emerging organisation which has good positioning and existence in the competitive marketplace. There are more than 17000 worker of company and approximate 283 stores of enterprise in only United Kingdom.

Through evaluating these presented factors, Homebase can easily identify and measure the calculation of their customer value management which aid in achieving the expected outcome in more efficient manner. It is essential for the organisations to manage their growth and consider these elements in order to achieve the outcome. As per the case study, more people like and get attracted toward the online and new media that has assisted the organisation in gaining new consumer base to Homebase (Kotler, 2017). Though the use of SMS and email marketing campaign, both has different influence on the practices of organisation.

Through the assistance and utilisation of effective methods and strategies, Homebase can meet their effective outcome emphasising over the customer lifetime value. Through the better communication, programs of loyalty, up-selling and cross-selling, authentic online presence and enhancing the consumer service level of organisation, one can achieve the effective organisational outcome in more significant manner.


P4 Type of market segmentation that can be applied to a customer base

Segmentation of market can be defined as the procedure which is optimise to eliminate the market along with segmenting consumer on the grounds of their traits, age, income level and other factors. This can assists the organisation in choosing a proper segment to focus over the practices to satiate their demands. This procedure not only assist organisation in gaining benefits but at the same time assist organisation in retaining consumer for more period of time (Kumar and Reinartz, 2016). Further, manager is accountable for reviewing and identifying the person who pay for services and products of organisation as well as make purchase for accomplish their demands.

The procedure carries out the practices for emphasising the benefits of organisation. Manager only use the segments which have high growth potential. Organisation which execute marketing strategies seek that distinct consumer have different demands and requirements. In order to resolve the issues associated with the market segments and focus over the strategies of business and marketing, an organisation shapes their segments of market and seek suitable straits that allows the organisation to aim the suitable targets of services and products tailored to certain requirements. Through the assistance of this, organisation can generate huge amount of benefits. In the gradual term, the procedure of market segmentation consist of major three steps which are described beneath:

Segmentation: It is the initial phase in which an organisation examine and identify the requirement and behaviour of consumer (Schwepker and Schultz, 2015). This designate Homebase's service offered through this for effective requirements and satiate it for longer time period of time. Before selecting the segment of enterprise, this is fundamental for Homebase to set the potential growth and performance of entire segment.

Targetting: enterprise select more than one division or segment of market to offer their products. Organisation distinguish the most effective and attractive segment to formulate more profit numbers. 

Positioning: As per this, determination of perception of consumer in context of services and products provided to consumer by Homebase.

There are several types of elimination of market which is being made in regard of achieving business objectives and aiming over the certain target of market. Here are mention the segmentation process which is mentioned here:

Demographic: in the sort of market segmentation, there are several components such as gender, consumer norms, age and many other components. This can assist the organisation in gathering huge information amount in context of certain characteristics and population. This play a vital role in the process of production. Organisation offer several services to their consumer as per demands, requirements and need of consumer for satiate them. Organisation aware consumer their services with SMS assistance (Stark, 2015). This can aid organisation in creating a powerful consumer base.

Geographic: As per segmentation procedure to make certain components like government, region and places where consumer live. Homebase provide different SMS offer to ongoing college student. One of the major benefit of such segment type is that this can aid organisation in generating more benefits amount.

Psychographic: In this type, the segments is done on the grounds of interest and hobby of people. It consist of those place of market in which brand and product quality is more fundamental relative to their cost. Organisation focus over those consumer who are not concerned with the cost of services. Individual who are more oriented toward luxurious life are the major focus of this segment. It involve status, personality and attribute of individual.

Behavioural: It is another sort of segmentation procedure, in which reports of consumer data and trends are evaluated through enterprise to review their loyalty of brand and other components.

Mixed Strategy: In this segmentation type, entire above mentioned factors and strategies are optimised through the organisation for distinguishing the market in certain segments.

Hence, through the management and determination of suitable practices of market segmentation, this is essential for an organisation to achieve their business objectives through the assistance of marketing segmentation, positioning and targetting procedure. This not only help in understanding the focus group of enterprise but also help in analysing skills, knowledge and assets of enterprise evaluating the value creation opportunities of organisation. This is concerned with the capabilities and resource appraisal activities of organisation in which context the opportunities of value creation and other extrinsic practices is being developed. There are several advantages which can be aid in identifying the unique opportunities for optimum utilisation of resource in new and recent marketplace.

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