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Customer Value Management Assignment (Doc)

   

Added on  2020-09-08

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CUSTOMER VALUEMANAGEMENT
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INTRODUCTIONCustomers are significant part of an organisation and plays important role to contributein the overall profit of the firm. Customer Value Management assists the company in order todeterminine different drivers which can valued the customers. Along with it helps in measuringthe performance of the firm relative to the competition, align efforts and focus on scarceresources. The present report is based on Home-base Company that initiated a SMS broadcastcampaign to support its DM activity with promotional offers. This report covers variouscomponents that enable the firm to determine and calculate a customer’s lifetime value. Alongwith, benefits of customer lifetime value to the organisation is explained. In addition, types ofmarket segmentation strategies which can be applied to a customer base will be determine.LO 1a.) Various components that enable the firm to determine and calculate a Customer’s LifetimeValue(CLV)Customer play important role in order to form value for the company. Customer lifetimevalue can be defined as the amount of value contributed by customers to the business over theirlifetime. Homebase Company needs to understand the importance of CLV. Through lookingtoward CLV company can easily define its marketing goals and sales strategies. The satisfiedloyal customer-based helps company in gaining high profits and assist to meet its target goals. Itis essential for the firm to maintain and sustain customers for longer time. (Leroi-Werelds andet.al., 2014). CLV is known as the standard measurement of a company’s net profit from its specificcustomers. Customer lifetime value is one of the important applications that can frame a betterunderstanding of customer acquisition cost. Also, helps in revealing a lot about the health ofbusiness model. Without measuring CLV it can become tough for the firm to understand itsprotentional customers (Verhoef and Lemon, 2013). If company do not measure Customerlifetime value then they cannot acquire customers whose lifetime value is not worth the cost.After identifying targeted group of customers, company can easily focus on providing customerservice tailored to their needs and make sure that they stick around it toward the long term2
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customers. To calculate CLV, it is important to look at the length if the customer lifespan,retention, the average profit and customer churn rate etc. There are various methods to calculate CLV. These are simple and traditional formulaeand is divided into historic or predictive, depending on the data used.(1)Historic CLV: It is the sum of all profits from a customer past purchase as it is anumber which is based on existing customer data from a specific period if time. (2)Predictive CLV: It permits projecting how much income an individual can generatefor the business in the course of the customer relationship. It is considered as one ofthe more complete methods of measuring CLV (Stark, 2015). In a predictive method, a transaction history and behavioural pattern used for determiningthe current value of a customer and for forecasting the way customer value can evolve with time.In this, more data is gathered to acquire accurate results. The simple Customer lifetime value formula: It is one of the basic way which help indetermining CLV is added up to revenue earned from a customer – the initial cost of acquiringthem(Raithel, Taylor and Hock, 2016). This simple approach can be used at the time whencustomers annual profit contribution remains somewhat consistent. On the other side intraditional formula annual sales per customers are not relatively flat, as it is more in depth CLVequation is needed. 3
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