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Customer Value Management of Homebase

   

Added on  2020-10-22

12 Pages3906 Words218 Views
CUSTOMER VALUEMANAGEMENT

Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1P1. Components of Customer's Lifetime Value, its calculations and ...................................1P2. Explain and justify the benefits of Customer Lifetime Value..........................................3P3. Factors influencing the customer lifetime value..............................................................4M1. Application of CLV and collation of customer data within organisational context.......5D1. Critical evaluation of key concepts of CLV management in an organisational context.5TASK 2............................................................................................................................................6P4. Type market segmentation strategies that can be applied to a customer base.................6P5. Decision-making models in the context of B2B or B2C..................................................7M2.Critical Analysis of segmentation models in an organisational context .........................7TASK 3 ...........................................................................................................................................8P6. Different techniques and methods organisations can apply to increase customerrelationships and customer loyalty.........................................................................................8M3. Evaluating appropriateness of techniques and methods applied at different stages of theconsumer decision - making process and CLV......................................................................9CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10

INTRODUCTIONCustomer Value Management (CVM) is concerned with the optimization as well asanalysis of a company's customer base. It is a crucial approach which is helpful in retaining anddeveloping existing and potential customers for an organisation respectively (Alexander andJaakkola, 2015). This report focuses on a case scenario related to a UK-based retail business,Homebase. The given report aims to develop a detailed understanding of Customer LifetimeValue (CLV) as well as evaluates different segments of a customer base that provideopportunities for customer value creation. Additionally, the report also explores appropriatetechniques and methods essential for enhancing customer lifetime value.TASK 1P1. Components of Customer's Lifetime Value, its calculations and As customer data has become a significant factor in determining the profitability andsurvival of organizations worldwide, it is important for any company to understand what are theneeds or preferences of a customer and how it can create value for both the business as well astheir audience. Customer lifetime value helps an organisation to measure how valuable acustomer is to the business over the span of their relationship (Arslanagic-Kalajdzic and Zabkar,2015). Instead of taking customer value derived from a single purchase into account, CLVconsiders the present as well as future revenue value derived from a client. It also helps inidentification of significant market segments which can prove to be highly valuable to acompany. CLV is an essential activity taken up by businesses as it encourages brand loyalty andprovides a pathway for better marketing strategies based on customer value. For Homebase,CLV helps to identify their position in the client value chain for different segments as customer'svalues differ according to sales agenda. Here, each transaction value is equivalent to thecustomer value derived by Homebase. CLV provide a long term consumer's value for theorganisation. Components of Customer's Lifetime Value includes Contribution margin (CM) of anindividual as well as Acquisition cost (AC) value invested to generate sales. These are explainedbelow:1

Contribution Margin: Here, the Contribution margin for an individual customer iscalculated by deducting customer variable cost from customer revenue. Its calculation isshown below:CM = Rv – VCwhere, CM = Contribution MarginRv = Customer revenue VC = Customer valuable costNote that the variable cost taken here is connected with the demand of consumers. These can bederived from income statements and include cost-to-serve, cost of goods sold, delivery andunique product packaging (Bagheri, Kusters and Trienekens, 2015). Acquisition Value: This component of CLV is the value of investment required to createa customer or make a sale for the business. Acquisition Value includes costs incurred inadvertising, marketing and selling costs. It can be calculated as follows:AC = [AC(t-1)] / Nccwhere, AC = Customer acquisition costNcc = Number of customer'sAC(t-1) = total acquisition cost of previous periodVariable cost are those which can change according to the Volume and it will dependupon the production so VC depend on customer's demand for a particular product & services.Contribution margin changed due to change in income statement and usage of contributionanalysis (Gohary and Hamzelu, 2016). Calculation of CLV:It is one of the important matrix which help the organisation to identify growingbusinesses. If company wants to retain their clients, then CLV metric helps the managementascertain the investment required for them to do so. Manager of the Homebase follows thismatrix to measure growth and customer's lifetime value by using this formula:CLV = Average profit contribution per customer * Average year which they remain customer – Initial cost of customer acquisitionFor instance: To Calculate CLV of Homebase company and necessary informations are givenbelow.Each year profit generated by consumer = £2,0002

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