Customer Value and Its Dimensions

This assignment delves into the multifaceted concept of customer value within a marketing context. It examines various dimensions of customer value, including functional, emotional, social, and price-based value. The analysis explores the relationship between customer value anticipation, satisfaction, and loyalty, emphasizing the role of customer value in driving innovation and competitive advantage. The assignment utilizes empirical research and theoretical frameworks to shed light on the significance of customer value in shaping successful marketing strategies.

CUSTOMER VALUE
AND MANAGEMENT

INTRODUCTION .....................................................................................................................................4
TASK 1....................................................................................................................................................4
P1 Various components which calculates customer’s lifetime value ................................................4
P2 Benefits of CLV for an organisation ..............................................................................................6
P3 Factors that can influence customers’ lifetime value ...................................................................7
TASK 2....................................................................................................................................................8
P4 Types of marketing segmentation strategies ...............................................................................8
P5 Evaluate B2B and B2C decision making models ...........................................................................9
TASK 3..................................................................................................................................................11
P6 Tools and techniques to increase customer’s relationship and loyalty .....................................11
CONCLUSION ......................................................................................................................................12
REFERENCES ........................................................................................................................................13

INTRODUCTION
In this competitive era, it is essential for business entities to attain and retain
customers by providing them qualitative products and services. Regarding this, management
also have to create value for their customers for raising their experience. It builds effective
relationship with customers where they continuously purchase wide range of products and
services (Verhoef and Lemon, 2013). The present assignment is based on Homebase; it’s a
British home improvement tratilers. Last year, the firm has launched broadcast campaign
SMS communication in order to make direct promotion. Through which, overall sales of the
company driven up by 26.5%. the report aims is to defines different that helps in evaluating
customers ’lifetime value; it aids organisations to accomplish their goals and objectives.
Readers will also come to know about factors which can hinder customers’ interest and value
in direct and indirect manner. There will a discussion on types of market segmentations
strategies which can be applied on customer base. In addition, B2B and B2C methods will be
also defined later.
TASK 1
P1 Various components which calculates customer’s lifetime value
In business units where products and marketing promotion channels are transitory,
companies are tend to raise customers’ relationship. It plays an imperative role in driven up
organisational profits and sales revenues. SMS communication has experienced to maximise
its profits primarily when the consumer makes supplementary consumptions thereby
offsetting the acquisition cost. Along with this, loyal customers are liable for generating value
for the company but sometimes they are scare in nature due to changes in market trends (Flint
Blocker and Boutin Jr, 2011). In this manner, administration should formulate various
strategies and linked it with company’s goals and objectives. For example- implementation
of product centric to customer oriented marketing. Thus a set of best practices is accessible in
emerging and increasing customers’ life time values.
Furthermore, in terms of marketing customer lifetime value is seemed as a forecasting
of actual profit endorsed in order to identify the entire future relationship with customers. The
core concept of CLV also encourages corporations to move their attention from short term
wins to long term relationship with target audiences. It also represents maximum limit of
spending so as to attain new customers from market. The prime motive of CLV metric is to
examine the financial value of each customer and it is totally differ from customer

profitability, in that CP deals with past whereas CLV looks forward. Therefore, CLV tool
shapes managers’ decisions and it is quite hard to enumerate. Along with this, CLV can be
applied on present value of cash flows which will endorse to customer relationship for
measuring the single lump sum value of future cash flows. Below describe the steps of
calculating customers’ lifetime value: -
 Prediction of enduring customer lifetime
 Forecasting of upcoming sales revenues, i.e. year-by-year. It is based on an overall
estimation of future purchasing of products and price is going to be paid for that.
 assessment of costs for carrying those products Calculation of the net present value of these future amounts.
Formula of CLV: - CMi = RVi – VCi.
Where:
Rvi = Customer revenue
Vci = Customer variable cost.
There is defined several elements which are getting involved in customer lifetime value,
such are stated as under: - Churn rate – It consists with specific amount of customers who has end their
relationship with the firm. Basically, churn rate constantly across the life of
relationship with buyers (Jung Choo and et. al., 2012).
 Discount rate – Discounting always ignored while calculating lifetime customers’
value. Sometimes, current interest rate is used as a proxy for discount rate. Retention cost – the cost includes customers support, promotional incentives, billing
etc. Retention cost is the amount that has to be invested in attaining and retaining
current buyers of the company.

 Period – Managing customers’ life time value is a critical task. Generally, it takes 3 to
7 years because people take proper time to trust on a specific brand or product.
P2 Benefits of CLV for an organisation
Management of healthy and positive relationship with customer plays a significant
role in growth and success of any business organisation. It is accessible in examining the
future impact of marketing strategies as well as investment on creating value for customers.
For instance- the model of marketing mix is acquired as a stimulator which represents actual
value of an additional buyer, product up sell and eliminates churn rate determination of the
optimal level of investments in marketing and sales activities (Nasution and et. al., 2011).
Along with this, customer lifetime value also encourage markets and business owners to
emphasis on long term benefits which will occur through target audiences; it led
enhancement in sales revenues and annual profitability. It also conducts a sensitivity analysis
so as to find out the outcomes from spending money on marketing and promotional activities.
CLV also optimise the maximum utilisation of available resources so as to gain better results
from marketing activities. It is a base of choosing customers and take imperative decision
towards making effective interaction with them. Another benefit of customer lifetime value is
to measure loyalty, probability of future purchasing, repurchasing, frequency, sequence etc.
of customers. Therefore, it can be said that CLV is one of the significant part for any business
organisations which ensure about future profits and growth
Benefits of CLV are stated as follow : - Effective Customer Segmentation: The foremost benefit of CLV is to manage
effectively customers’ segmentations by offering them customised products and
services. It leads to gain maximum possible outcomes and revenues from buyers.
Customers’ lifetime value also rely on potentials and raise predictions accuracy. It
provides an indication of lead worth as well as converting the lead costs as well. Better Forecasting: Another benefit of CLV is to make better future predictions, i.e.
who are the target audiences of the company and how they can be beneficial for it
(Heller Baird and Parasnis, 2011). Along with this, CLV also plans the future
availability of products in terms of customers’ demand. In numerous product
categories, likelihood of acquisition possibilities for each and every single product
category helps in optimum utilisation of available resources by translating them into
higher profits.

 Re-invent Loyalty Management: Customer lifetime value can be a good indicator for
improving operational efficiency and reduce customer dissatisfaction. A better
understanding of customer needs and behavior surely helps in improving customer
loyalty for a longer period. Based on this understanding, companies can redesign their
loyalty plans to make them more effective.
 Retention/Win Back of Customers: CLV also designed new and innovative
programmes for eliminates attrition. Corporations can arrange these events so as to
win back their customers and formulate strategies and policies by takig necessary
decisions.
P3 Factors that can influence customers’ lifetime value
In this over dynamic environment, there are several elements which can influence
customers’ lifetime value of the company and reduce its sales and profitability. Due to
changes in external environmental, customers’ needs and wants are also getting changed day
by day. In this relation, management of SMS communication should use proper matrkeing
strategies and policies. Basically, customer lifetime value is seemed as total worth of a
consumer over a business (McColl-Kennedy and et. al., 2012). There is described certain
factors which can influence CLV that are stated as under: -
Political factors – These elements are considered with government taxes, duties,
legislations, laws, sometimes government or associated authorities create certain rules which
can affect customers’ purchasing power. For example- British government increase tax rates
on consuming products and services then people will not able to purchase these thing. It also
hinders growth and profitability of business organisations as they cannot attain their goals
and objectives. It is essential for companies to maintain good political relations so as to
survive in international markets as well. In addition, due to political stability in a nation
business organisations can easily analyse the value of customers.
Economic factors – Such elements involve unemployment, income level of people,
poverty, interest rates, bank rates, population etc. In 2008-09, UK’s economy had faced an
economic crisis which was also affected business growth and development opportunities. For
example- if people have good disposable income then they can easily spend money on
consuming things whereas lower disposable income reduces profitability and sales revenues
of an organisation. Thus, managers have to analyse the economic condition of a nation before
calculating their customers’ value.

Social factors – In this modern era, due to rapid changes in market trends and
customers’ needs it becomes too difficult for organisation to remain successful in target
market. Customers’ behaviour can be affected by reference groups, relatives, immediate
family members and role in the society. Individuals who belong from upper middle class
would like to spend money on high class or luxurious products (Goetsch and Davis, 2014).
In this manner, if a firm will not manufacture such products that are able to satisfy customers’
needs in an effective manner; its customers’ lifetime value will be lower.
Technological factors – Changes in production and technology helps business entities
to improve the quality of their products and services. It results customers’ will get easily
attract towards firm for long term period; this will increases their lifetime value and loyalty
towards the company. Technologies also help in getting in touch with customers and
recognise their desires so that necessary strategies can be made in order to analyse the value
of customers.
All these above discussed factors put a huge impact on the number of loyal customers
of the company. If an organisation is unable to recognise the future impact of these elements
then it cannot attain its goals and objectives.
TASK 2
P4 Types of marketing segmentation strategies
Segmentation refers with dividing a large group into different small entities whereas
marketing segmentation is core concept of marketing which classified a market into several
small units on the basis of customers’ preferences, tastes and demands (Linoff and Berry,
2011). One market segment is totally distinct from the other segment; in which individuals
from same segment react in a parallel way for fluctuations in markets,
Basis of Market Segmentation
Geographic Segmentation – It classified the market into geographical basis. This
marketing segmentation is essential for business owners because individuals belong from
several regions and they have different needs requirements. Thus, geographical segmentation
is accessible to make a personalised draft of customers in order to make marketing
campaigns.

Demographic Segmentation – In this, the market areas of the company is divided on
the basis of age, marital status, gender, family size, religion, occupation, race, income etc.
Demographic segmentation is one of the common practice of segmentation which has been
used by every business industry because it is based upon consumer’ purchasing behaviour
which influenced their demographics.
Behavioural Segmentation – It is based upon buyers’ preferences, behaviour,
choices and decision making. Behavioural segmentations also involves customers’
knowledge towards a specific product and services; it is assumed that behaviour of an
individual affects their purchasing decision. Generally, people attract towards brand loyal or
brand neutral (Kim, Gupta and Koh, 2011).
Psychographic Segmentation – It classifies the market or audiences on behalf of their
lifestyle, personality and attitude. Psychographic segmentation works on premises i.e.
customers’ behaviour can be analysed by their attitude and living standard. For example-
higher income people will prefer branded products whereas lower income people normal
goods. In addition, personality is an intermixture of distinctive character of a person, like his
or her habits and traits whereas lifestyle is a way of living of an individual. Both can
influence the obtaining habits and decisions of a customers on a great extent.
P5 Evaluate B2B and B2C decision making models
Business to business marketing and business to customers marketing, both plays a
crucial in in creating customers lifetime value for long term period. B2B marketing is a
concept in which demand of other businesses is fulfilled by companies. It helps managers to
get high competitive advantage from target markets and builds healthy and positive
relationship with business organisations. In this modern era, several B2B marketers are used
digital technologies in order expand their market area at global level (Gallarza and et. al.,
2011). Companies are getting involved to promote themselves through social media, i.e.
Facebook and Twitter. In other words, it can be said that business to business a marketing and
selling of goods which are used by other companies for their production process, for doing
general business operations and for resale any product.
B2B marketing is classified into four categories, such as-
 Companies that own customise their products and services
 Government agencies, the single largest target and consumer of B2B marketing.
 Institutions like hospitals and schools.

 Companies that turn around and resell the goods to consumers, like brokers and
wholesalers.
Along with this, B2B marketing plan is emphasised on delivery of application. It
means it doesn’t believe to conduct wide promotion and advertising. Business marketers can
prepare a plan so as to assess and determine the importance of following elements that stated
as under: -
 The product or service: In B2B marketing, buyers have a good knowledge of products
and its quality, services catered by the host company and cost-saving or revenue-
producing advantages.
 The target market: The markerts should have good knwoeldge about niche industries
or target markets in which they will sell their produtcs and services.
 Pricing: Businesses are concerned for potential value, cost and revenue rather than
consumers. In order to cover overall cost, B2B marketers tries to influencing
customers as proudcuts and its quality are worthwhile for them. .
 Promotion: It is essential for B2B marketers to promote themselves over the world.
When this will happen, markets will learned the other methods of gaining growth and
success (Martelo Landroguez, Barroso Castro and Cepeda-Carrión, 2011).
Business to customer (B2C) marketing
B2C, marketing is the concept which refers with the type of business that is customers
centric. Such firms tend to sell their products to customers for their personal use.; they
provides the facility of packaging which is suitable for individual consumption. There are
several business organisations sell its goods to customers as well as business by using
different startegies and policies. Business to customers marketing method is acquired hy the
SMS communication so as to create value for target audiences for long term period.
The main motive of B2C marketing is to achieve customer loyalty and retention. If a business
organisation has large group of loyal customers then it can easily accomplish high
competitive edge.
Hence, B2B and B2C marketing can be acquired by the firms according to their
nature and working style. It helps business organisations to take necessary decisions so that
marketing and customers’ oriented strategies can be developed in an appropriate manner.

TASK 3
P6 Tools and techniques to increase customer’s relationship and loyalty
In today’s scenario, it is essential for business organisation to make constant evolution
by accessing customers. It helps them to get unlimited information about buyers’ taste and
choices. Consumers are already aware and entitled to freedom of selecting products and
services. It is necessary for companies to cope on going bond with their target audiences. For
attaining this objective management should tend to create customer centric framework that
instils intuitions so as fulfil customers’ expectations and desires (Blocker and et. al., 2011).
Here, the concept of CRM (customer relationship management) is befitted that aids to boost
buyers’ retention and raise their acquisition at low costs without jeopardizing customer
relations. The term also ensures effective transformation of new consumer to a loyal client.
Along with this, companies are also trying to adopt various tools and techniques that assists
in retaining customers’ loyalty and healthy relationship with them for long term period. Brief
description of these tools is stated as under: -
Data sources and database - It is essential for companies to find out the reason that
enhances repeat purchasing, for this process, management can use various databases which
provides wide range of information and factors. It is also assistive in analysing and measuring
marketing strategies which are associated with customers retention. Furthermore, databases
also track as well as moderate overall customers’ expectations and market trends; it is
associated with linked with a CRM system that aids organisations to determine the reason
behind reduction of customers’ interest and develop strategies in order to overcome with
these problems
Decile analysis – Another method that helps SMS communication to demonstrate the
future sales and product’s profitability. This kind of evaluation signifies a prominent
percentage of those buyers who are liable for generating profits for the firm. Basically,
declies are a group of persons who generally make higher purchases in a certain time period;
such key group of persons spawn 60 to 80% profits. Thus, if a firm will capable to determine
the number of loyal customers then it can formulate policies and strategies accordingly (Siu
and et. al., 2013). Decile analysis supports business entities by driven up customers’
relationship and loyalty for long term period,
RFM analysis – The prime objective of RFM tool is to forecast about who are the
valuable customers for the company. RFM entails with recency, frequency monetary value.

In which, Recency means total purchases of a customer in recent time, whereas frequency
refers with occurrence of purchase and monetary value spending ability of a customers on
consuming products. All these aspects builds a RFM matrix by placing examined data and
information inside this matrix. Thus, the matrix is useful to characterised buyers as per their
buying behaviour as provide them products and services according and retaining thir interest
within organisation.
Targeting defectors – It is really painful for organisation to lost customers, it also
harm company’s actual profits and sales. So that if management find out the potential
defectors in external environment then it can easily retain customers. It also creates healthy
and positive customer relation and loyalty.
CONCLUSION
As per the above discussion, it get concluded that customers are the marketing kind;
they are liable for improving or decreasing brand image of a product. In order to survive in
marketing and sustaining high competitive edge, companies have to adopt effective
marketing and promotional strategies and policies. There are several factors which involve in
customers’ lifetime value, like – churn rate, discount rate, rentation etc. CLV also put a huge
impact on decision making process of the firm. Political, social, economic and technological
factors highly affect a business organisation and its customers’ lifetime value. Thus, to
increase customers’ relationship and loyalty firms can acquired RFM and Decile analysis.
REFERENCES
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