- Explain the components that can help in determining and calculating customer lifetime value.
- Explain the importance of customer lifetime value for company.
- Evaluate the factors which impact customer lifetime value.
- Explain the types of market segment strategy that can be applied to customer base.
- Determine B2B and B2C model or making decisions regarding customer value creation
- Analyse techniques and methods which can help in enhancing customer relations.
Customer value management is a business tool which is used to analyse consumer's view and their demand to provide them effective services in order to maximise profits and growth as well (Hammer, 2015). This term basically used to maximise consumer's value in individual manner. This is mainly focusing on designing process of firm that highlights operation and function approaches. All these organisational activities affect on productivity as well as profitability of firm. This report is based on Homebase which is a British home improvement retailer organisation. This firm was founded in the year of 1979 by Sainsbury and GB-Inno-BM. This report is discussed about Various elements to ascertain customer's lifetime value, its advantages and Factors that impacts on CVM activities. It also represent Types of market segmentation, B2B and B2C decision making models as well as different methods and techniques to increase customer loyalty and relationship.
P1 Components that enable an corporation to determine & calculate customer's lifetime value
Customers are the last buyer of products, so for them an organisation requires to use appropriate tools that helps to build lifetime values for them. In this, employees of organisation also provide their effective contribution to build positive relation with target customers. These kind of organisational activities are used to maximise profit and growth of firm in proper manner. Main motive of Homebase is to increase customer's purchasing power and products sales for desired growth (Hollensen, 2015). Homebase is a broadcasting organisation that provide their effective services to customers on the basis of SMS and email facilities. Through this, they can easily spread awareness in customer's mind for their new services. There are different elements that enable an corporation to determine & calculate customer's lifetime value -
Cohort Analysis: This is an effective analysis process in which group of individual's are providing their own views and preferences toward organisation's diversified business offerings. Main objective behind this analysis is to improve values and qualities of different services for providing higher satisfaction to target customers. This process takes less times to implement appropriate modification in products on that basis of customer's views and employees opinion. Through this, Homebase can easily understand their customer's requirement and demand for appropriate services. These kind of business activities aid to maximise customer's lifetime value for getting long term benefits and desired growth easily.
Present Value: It is a most important analysis process that is used to identify customer's role and values in organisational procedure. This process basically determine cost and price of products that is offered by firm in target market. To increase customer's value, Homebase requires to use effective methods that helps to maximise sales of products. Through this method, Homebase can also address their service users view and opinion toward firm's operation activities (Kerzner and Kerzner, 2017). These activities and approaches increase periodic values to getting higher competitive advantages easily. To maximise customer's lifetime values Homebase requ waresto reduce their products cost to attract.
Customer Loyalty: For a business organisation' it is important to build strong relation with customers to getting long term benefits easily. In this process, Homebase require to understand their services users demand and need to serve quality services in front of them. Through this, they can easily create customers loyalty toward their products and services as well. In this process, employees of Homebase also play a most important role to understand consumer's issues, need, demand and problems. Through this, they provide quality services to them on the basis of their requirement. These kind of activities helps to provide higher satisfaction to them in appropriate way.
Mathematical Formula: This is a statistical representation that is used to analyse customer relationship value for an organisation in the terms of their satisfaction level and purchasing power for specific product. It is consider appropriate data of firm's financial gain and losses. Through this, researcher can easily analyse firm's average income and growth that generated by target customers (Kim and et. al., 2015). These kind of analysis represent loyalty of consumer's and their effectiveness toward organisation's products and services as well. This is a creative and impactful approach that requires to consider by Homebase in their operational and functional approaches. This method consider specific formula as Total revenue ÷ Number of months since customer joined
Some other mathematical representation of this method can be -
CLV = ((T x AOV)AGM)ALT
Here; T = Average Monthly transactions
AOV = Average Order Value
ALT = Average customer Lifespan (in Months)
Here; R = Monthly Retention Rate
D = monthly Discount Rate
Individualized CLV: For an organisation, it is require to understand their customer's demand and need to provide them quality services. These kind of activities maximise firm's growth and income in appropriate way. Homebase can easily increase services users demand by using different type of methods as cost effective approach, maximise customer's loyalty by serving quality services and build long term relation with target users by providing higher satisfaction to them. All these activities helps to achieve target goals and objective in appropriate way. These approaches aid to create positive image and goodwill in target market.
P2 Benefits of Customer Lifetime Value
In a business organisation, customers play a most important role who provide desired growth and income to firm in appropriate manner. For Homebase, it is required to mange customer lifetime values to build their own image in target market easily. These kind of methods will be beneficial for them to getting higher profit and desired growth. Through this Homebase can get higher competitive advantages (Kotler, 2015). There are other benefits of Customer Lifetime Value are given below as -
Financial growth – For a business organisation, it is required to build strong relation with customers to getting desired growth easily. Through firm can increase their sales and revenue by providing quality services to services users. Some of the stakeholders of company provide appropriate investment fund to firm that helps to maximise operational activities in effective manner. For Homebase, it is require to build strong and effective relation with customers to maximise their purchasing power by providing desirable and quality products to them. Through this they can easily maximise financial growth in a proper way (Kotler, 2017).
Maximise brand loyalty – Customers of a products always demand for best quality services at any cost. So for them Homebase requires to consider effectiveness that helps to provide higher satisfaction to them. Through this they can easily increase brand loyalty in target market. These types of business approaches helps to maximise firm's growth and income in appropriate manner. Brand loyalty always maximise Customer Lifetime
P3 Factors that affect customer lifetime value
For a firm it is require to create lifetime values of consumers to getting higher competitive advantages and long term benefits as well. Homebase require to analyse their customers values to getting appropriate growth by providing quality services to them. To analyse customers lifetime values, firm can use mathematical formulations that help to analyse firm's net revenue and income that determine customer's relation with firm. These kind of business activities impacts on firm's productivity and profitability as well. There are different type of factors are determine below that affect customer lifetime value such as -
Firm's objective – For a business organisation it is require to analyse their target goals and objectives that can be affected by customers demand and need. Main objective behind this process is to make appropriate modifications in firm's products as well as services. These type of procedures takes a specific time to adopt several changes in organisational services properly. So for this require to manage financial resources, strategic process and work effectiveness to getting long term benefits easily.
Types of product that organisation sell – For a business organisation, it is require to analyse type of products that they offer in target market. These type of factors can affect customers lifetime values that can impact on selling and purchasing process. For Homebase it is require to analyse types of product that they sell and demand of customer. Through this they can easily make appropriate modification in their services. All these activities helps to maximise customer's satisfaction level in effective manner (Rihova and et. al., 2015).
Services and promise level – This process contributes in determination of the promises which are provided by organisation to their customers and services that they exactly provide to them. Through this they can easily analyse their objective and current services to make effective modifications properly or as per the users demand. These type of activities can impact positively and negatively on firms image and goodwill. So for this firm require to offer effective and impactful products to their customers on the bases of their promises.
Market stability – For Homebase, it is require to create market stability to maximise customers values and their effectiveness properly. These kind of elements create firms market image and values to getting long terms benefits easily. Through this Homebase can maximise their effectiveness and goodwill with specific positioning. Unstable organisations can reduce their market values and customer lifetime value as well (Schwepker and Schultz, 2015).
Changes in technology – In this new era, advance technology has vast impact on several business organisations. So for this Homebase requires to adopt innovative ideas and digitalisation to provide effective and impactful services to their customers. Now a days each customer is demand for attractive and advance feature products that provides higher satisfaction to them. So for this, firm requires to adopt these new features and skills in their business activities to getting higher and desired benefits.
Social factors – for a business organisation, it is required to analyse their customers demand and need to provide them appropriate products and services easily. These kind of activities impact on business approaches and its sales procedure.
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