The scenario in this report is providing opportunists to examine lifetime value matrix and understanding from the perception of the marketing manager.
- Demonstration of understanding of various concepts of CLV along with B2B and B2C.
- Evaluation of various segments within the customer base.
- Analysis of appropriate techniques in order to enhance CLV.
Customer Value Management or CVM is a measure which helps to determine a company's customer's view, measures performance of the competition, focus scarce resources and create your sustainable competitive advantage. It is a very powerful tool used in any business as it is directly linked with the customers of the company. Many factors affect the customer value management which will be discussed in this report like benefits of customer lifetime value and the factors that influence the customer lifetime value in the organization. Different types of market segmentation strategies related to CVM and different models to demonstrate opportunities for customer value creation will also be focused.
A) Analysing different components that enable the organization to determine and calculate a customer’s lifetime value:
The amount of value a customer contributes to the business over their lifetime is known as Customer lifetime value (CLV). It can help in setting marketing goals and sales strategies encourage existing customers to spend in company's business. There are various components which determine and helps to calculate the customer's lifetime value, such as understanding customer acquisition costs, repeat transaction and customer retention rate.
- Customer Acquisition Costs (CAC): It is that one matrix which can determine company's future in the market. CAC is that cost which is linked by the customer to buy company's product or service (Di Benedetto, C.A. and Kim, K.H. 2016). It is an important task to acquire new customers.
- Repeat Transaction/Purchase Rate: The percentage of the current customer base of the company that has come back to shop again is known as Repeat purchasing rate. It is a good measure of loyalty, to evaluate performance.
- Customer Retention: To increase their number of repeat customers and their profitability is known as customer retention. This rate enables to extract more value from existing customer base.
B) Benefits of customer lifetime value to the organisation:
Apart from its potential challenge in market, customer lifetime value is a strong business tool which can be applied by company gain benefits. In particular, it helps the organization in several ways, such as,
- Customer Segmentation: This segment enables the business to differentiate the customers on the basis of long term profitability, through which they can decide, to change their market strategy or not.
- The Largest Business Asset: It provides the image of company's largest asset. This enables the organization to evaluate if they moving in right direction or not.
- Brand Loyalty: Copying services can be easy for the competitors but customer loyalty towards them creates the good image. Customer loyalty is very difficult to copy by the competitors (Flint, D.J. and Woodruff, R.B. 2014).This helps to maintain the brand loyalty in market.
- Early Warning Signs: It helps to identify in which segment of the business, the problem has arisen, so that appropriate measures can be taken by them to overcome that issue.
- Saving Money: When company knows what their customers are seeking for, it becomes easy to serve them. As its cheaper to maintain the old customers than making new ones. This helps to save money and make profit.
- Better Marketing: Customer Lifetime Value leads to marketing which focuses on the customers. This helps to promote their products in the market.
- Saves Time: Focusing on the target market and loyal customers, it will save time and money by not wasting effort on other things.
- Balance Short Term Results And Long-Term Goals: In order to get short-term profitability and longer term goals customer lifetime value helps in making better decision. (Kleiner, G. 2016).
These are some benefits which shows how valuable the calculation of Customer Lifetime Value can be for them.
C) Evaluate the factors influencing the customer lifetime value:
There are several factors which can affect company's customer lifetime value in great manner, such as,
- Market stability – In rapidly developing world, it is difficult to be stable in the market. To overcome such problem, company should come up with marketing strategies with innovative ideas.
- Company Objective: This is the main factors which the company has to focus on. Being financially strong and strategically-oriented in the market, will make them to gain a long-term view of customer lifetimes values.
- Type of Product selling: What products company is offering to their customers has great impact on the market. There will be a longer ‘lifetime value’ associated with some products, for example, products which are associated with young children like baby food, will have a defined customer life value.
- Service and promise levels: There is great importance of the services you are providing to the customers in order to make them happy. Serving customers well in the business will help to increase the customer lifetime value for company, which will help them to stay strong in the market (Kumar, V. and Reinartz, W. 2018).
D) Concept of customer lifetime value within a specific organizational B2C or B2B context:
Customer Lifetime Value (LTV) is defined as the revenue that a business will generate from each customer over the length of the relationship, considering acquisition and retention costs. LTV is known to be widely used in B2C market. This concept can be used to illustrate the possible dynamics of the customer lifetime value. Customer Lifetime Value is based on the relationship between the company and its customers. Some key factors which can be applied to increase the CLV, are
- To make marketing accountable there is so much of pressure on company.
- Problems such as, stock price and aggregate profit of the company or a strategy business unit do not solve the problems of managers.
- It's easy for companies to store and process huge volumes of customer transaction data with the help of information technologies.
Also Read: Customer Value Management - Homebase
1) Types of market segmentation strategies applied to a customer base:
Market segmentation is the oldest marketing trick applied in a business. Market segmentation has become more critical now-a-days as customer population preferences has become more specific and wider and more competitive options are available in the market (Nagaoka, H. and et.al. 2016). Company is launching new products and ideas keeping in mind, customer’s needs and according to market segmentation. There are basically four types of market segmentation- demographic, behavioral, psycho-graphic and geographic segmentation and each type vary in terms of functionality.