Customer Value and Its Measurement

This assignment delves into the crucial topic of customer value within a business context. It examines various definitions and perspectives on customer value, highlighting its significance in shaping successful marketing strategies. The assignment further explores diverse methods employed to measure customer value, encompassing both quantitative and qualitative approaches. By analyzing real-world examples and research findings, students will gain a comprehensive understanding of how businesses can leverage customer value insights for enhanced profitability and customer satisfaction.

Customer Value Management

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Components that enable determination & calculation of customer's lifetime value..............1
P2 Benefits of Customer Lifetime Value....................................................................................2
P3 Factors that affect customer lifetime value............................................................................4
TASK 2............................................................................................................................................5
P4 Types of Market Segmentation Strategies applied to customer base....................................5
P5 B2B and B2C models of decision making and opportunities value creation can be applied 6
TASK 3............................................................................................................................................8
P6 Different techniques and methods can apply to increase customer relationship and loyalty 8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Customers are the ultimate god of business whom consideration need to include by
business managers in their working so that appropriate gain become possible. It is essential to
value all provided feedback of clients so that effective management of problems could be done
(Verhoef and Lemon, 2015). This project is based on customer value management by
considering an example of Homebase. In this project, business need to evaluate the customer
lifetime value and its components so that better and effective working could be promoted in a
suitable and appropriate manner. Along with this, management need to determine benefits of
lifetime value as well so that suitable gain become possible with considerable factors as well
which impacted lifetime value as well. All these things need to evaluate by using B2B and B2C
models as well so that appropriate decision making become possible in order to grab better
associated results. All these consideration will need to underpin by analysing customer value
management.
TASK 1
P1 Components that enable determination & calculation of customer's lifetime value
Customer's lifetime value is an essential method which is using by Homebase. It helps in
forecasting so that they will be able to develop an effective relations with their customers. As a
result, they will be able to maintain long term relationship with them (Goetsch and Davis, 2014).
For above stated aim, organisation will calculate CLV as it aids them to determine periodical
value among firm as well as service users. There are some factors which will include to identify
CLV and these are stated as beneath:
Present value: It is rate which is associated with repetitive buying nature of customers.
PV is considered as a discounted rate related to cash flow which is developed through existing
client base. It will be found out with assistance of TVM (time value of money) because CLV is a
connected with periodical value which is highly depend on retention of customer.
Customer Loyalty: If clients are much loyal for an association then, this will aid into their
long term retention; for this, they will take support of CLV. Rather than this, if they are not
satisfied with products and services of an enterprise then, they will never want to go there again.
Hence, it has been understood that loyalty of people will cater advantages to company, but if
there is lack of loyalty then, it will affect their production and profits (Chacour and Ulaga, 2015).
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Mathematical formula: Many professionals are using formula so that they will determine
CLV. With aid of this, adequate value will be found out which support manager to into
judgement making procedure. Formula will comprise many components, such as customer's
number, profits.
Formula: Total profit/ number of months since client joined
Through this, average revenue will be identified which is developed through purchaser. Some
other formula will also be utilized:
CLV: ((T*AOV) AGM) ALT
here, T: Average monthly transactions
AOV: average order value
ALT: average customer lifetime (in months)
Details:
Here, R: Monthly retention rate
D: Monthly discount rate Cohort analysis: It is a team examination of individuals who are sharing similar type of
characteristics. People who include into this sector are evaluated in same manner. Major
benefit of using this tool is that this consumes less time and a single person can be
examined in similar time. Additional, deviations will be much common which will
provide impact to CLV (Kerzner and Kerzner, 2017).
 Individualized CLV: If company wants to acquire accurate measure then, this method
will be used by them; because it concentrates on each person's behaviour as well as
attitude. For this, an enterprise will use both kind of data, i.e. past and present. With help
of this, manager will formulate an effective presentation.
P2 Benefits of Customer Lifetime Value
In modern era, there are many companies who are paying lots of attention to
determination of CLV. When examination is done and firm acquires positive outcome then
usefulness of this factor will easily understand by them and after that they use this technique into
operational exercise. As a result, reputation, market share and in addition profits of firm easily
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get enhanced which assist them into their success and enhancement (Stark, 2015). Along with, of
any affiliation wants to take benefits from rivals then, they will utilize CLV into business.
Henceforth, there are certain benefits of this, which are stated as beneath:
Effective customer segmentation: By dividing clients into many sectors, company will
be able to accomplish needs and requirements of people and for this they will use CLV. With aid
of this, firm will modify their items so that they will provide them maximum satisfaction. It will
help them to create an effective image in front of people at marketplace.
Price setting: CLV assists superior to set value of products as well as services through
knowing their demands and tastes. By doing this, they will be able to compete rivals at market
and attain benefits from contenders (Rihova and et. al., 2015).
Better forecasting: By determining CLV, an employer of firm find out forthcoming
purchaser's demand. As a result, they will be able to develop an effective plan and acquire
positive result. In context of Homebase, they want to enhance their sales by almost 20% and to
achieve it, they need to calculate CLV. Organisation wants to improve success in SMS services.
Therefore, with help of CLV they will identify opportunities in relation need of enterprise.
Re- invent royalty of management: Customer lifetime value is an indicator that shows
need of improvement of business activities for enhancing qualities of goods and services that
company is offering to its current and potential customers and upon this factor customer loyalty
depends. This is a value that provides light to those areas that are in need of improvement. With
assistance of CLV, managers get to know about customer's buying behaviours. By taking help of
customer lifetime value managers can make efficient decisions in order to redesign their SMS
service by which they want to increase their market share. CLV also helpful in identifying
current quality of services.
Retention/Win Back of Customers: CLV is helpful in recognition of present and future
potential of SMS services because with help of this facility Homebase want to make increment in
their sales volume by 20%. By recognition of exact need and desires of customers management
personnel can address those in order to make corporation's purpose fulfil (Kumar and Reinartz,
2016). With help of this action Homebase can get new and remarkable position in marketplace.
For pointing accurate need by serving facilities it is essential for firm that they should formulate
efficient strategies that may enhance productivity of association.
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There is a new and latest tool that Homebase is using for foresting future opportunities as
well as to find out how long a relationship between company and customers will go. In recent
time CLV is a improved tool that is more reliable for identifying actual and exact want of clients.
By assistance of this corporation enhance their business operations which is compulsory for
making improvement in productivity (Leroi-Werelds and et. al., 2014).
P3 Factors that affect customer lifetime value
Customer's lifetime value can be stated as an forecasting of future bond that will a
company possess with its consumers. CLV aids marketing manager in finding expectations that
buyers have from organisation and how this can be match. This ultimately helps in understanding
buying behaviour of consumers. It also assist in taking decisions regarding product development,
customer support, sales, supply chain management etc. CLV can be considers as a indicator of
customer loyalty and worthiness and also determines change factors that arises as time passes.
With help of this topic managers can find out how a loyal customer is contributing in profit
generation and up-to what level.
There are several elements which will provide impact to CLV are mentioned as beneath:
What type of product you sell: If goods and services of an enterprise is much effective
then, this will aid to maintain loyalty of clients for longer time duration (Taheri and et. al., 2017).
But if association is not able to fulfil requirement of individuals then, they will switch to some
another brand.
Service and promise level: It defines that how an organisation is able to fulfil promise of
individuals through their items and services. For instance: if buyer buy a car then complementary
service will be provide to them by manager which is totally free. But if they are not fulfilling
their promise then client will get disappointed and will switch to some other brand.
Market stability: Marketplace is developing quickly so that it is must for company to
evaluate requirements and prerequisites of purchasers. Preferences as well as taste of people will
modify as per time passes; therefore, it is necessary firm to modify their items accordingly. As a
result, affiliation will able to take benefits from their contenders at marketplace. Like if firm is
providing services to people at affordable price then it aids to capture attention of many
individuals. Thus, they will survive at market for maximum period of time (Martinsuo and
Killen, 2014).
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Company's objective: If an enterprise is financially stable then this will provide more
confidence to them in CLV. It has been analysed that if firm is having sufficient amount then,
they will easily alter their products which will render them maximum satisfaction. It will assist
them in taking advantages from competitors at competitive world. For instance: Apple launched
series of iPhone but after 2 months they introduced X series to fulfil requirement of people.
Henceforth, above described elements play an eminent part in providing influence to
relation of customer value. It has been examined that clients are considered as a end user of any
items or services. Thus, it is fundamental for each and every kind of affiliation to gain their trust
as well as loyalty as it aids into their long term retention (Schwepker Jr and Ingram, 2016).
TASK 2
P4 Types of Market Segmentation Strategies applied to customer base
Market segmentation portrays that company will divide marketplace as per needs and
wants of clients. Therefore, they will be able to render them facilities as per their demands or
requirements. It will also assist superior of company to take an effective judgement in relation of
investment or offers. The fundamental reason behind segmentation is that this will help to
accomplish needs of each kind of person so that Homebase will able to enhance their profits and
market share effectually.
Market will be segment into many sub segments, like as per characteristics of people. In
context of Homebase, they will classify it into two parts, one in which persons are not using
service of SMS and another is related to those people who are using it (Payne, Frow and Eggert,
2017). There are some elements which are associated with market segmentation and these are
discussed as below: Demographic: This is much easy method and using by each type of company either they
are operating their business at large or small scale. It will comprise many components,
such as gender, marital status, education, age, occupation and many others. By doing
partitioning firm will easily enhance their SMS service facilities because it basically
depend on age of people. If there are various users of service of affiliation then, this will
help them into improvisation of revenues. Geographic: If superior wants to target clients particularly then they will use this factor.
Like an example: there will be some areas in country where network is not effective so
that, people will not be able to use SMS services which is providing by company
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(Christopher, 2016). Thus, it is fundamental for government to improve that kind of areas
so individuals will use each type services. Psycho-graphic: Persons include into this, who are having similar kind of lifestyle,
interest as well as hobbies. They are basically brand conscious and never get attracted
towards another brand. Along with, individuals want to possess luxury lifestyle so that
they will maintain their appropriate status in society. This classification will involve
personality types, societal status, clients interest, values, attitudes and many others. Behavioural: In recent period of time, this kind of segmentation is highly utilized by
company. As now they are using digital techniques which provide maximum satisfaction
to clients. Therefore, they will be able to render services to people in less value and gain
their trust which help in profits improvisation (Xu, Peak and Prybutok, 2015).
 Combination strategy: This is considered as a combination of all strategies which are
stated above. In context of Homebase, they are using it so that they will easily enhance
their 20% sales through enhancing SMS services.
P5 B2B and B2C models of decision making and opportunities value creation can be applied
Every business work and render their services either to the customers or to business. It is
essential to gain and deliver quality services to each and every individual as well as take
beneficial decision in context of them so that appropriate and suitable target accomplishment
become possible. The process of decision making based and completely reflect on the type of an
organisation so that effective and efficient working get done (Verhoef and Lemon, 2015).
Thus, to enhance and maintain effectiveness towards concern business operations,
management have to implement appropriate and suitable decision making process which enable
them to get sustain into keen competitive world. Under this, there are three different kinds of
decision making models which Homebase company applied in the Business to Business and
Business to Consumers. Thus, various decision models which need to evaluate by Home base
stated as follow:
Decision Making Models B2C B2B
Classical/ Rational Model  For taking better and
appropriate decision,
management need to
underpin the needs and
 It depicts as one of a
finest way of doing
business to business
where possibility to
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demands of each and
every user properly
through which suitable
rationale get done
 Need to estimate all
issues and problems
properly for analysing
in a suitable frame
 management need to
frame their targets clear
like in small firms.
Although, at such
context this approach is
applicable
include decision
making models are
less.
 In this consideration of
business to business,
issues are less clear and
much complex in frame
 Objectives and targets
are not so clear in
frame as well as taking
place for large business
consideration
Bounded Rationality or
Administrative Model
 In this aspect, target
accomplishment need
to include properly
 It is important to
include and define all
alternatives properly so
that efficient and
appropriate work could
be done
 All consideration get
done in a better and
effective manner
because taking place at
small level.
 In this, there is an
involvement to top
management in order to
take better decision
regarding achieving
aims in a systematic
manner.
 There are many options
to managers and it is
complex to examine
them.
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TASK 3
P6 Different techniques and methods can apply to increase customer relationship and loyalty
Business management use various tools and techniques in working so that association
become able to maintain better and suitable relationship with users so that appropriate and
suitable gain become possible (Goetsch and Davis, 2014). Home base is providing better and
effective services to each and every user through which their satisfaction level get enhance in a
better and suitable frame. Although, they are providing various kind of facilities which enables
them to gain opinion of different number of customers which facilitate appropriate and effective
working. Moreover, they need to implement each and every activity properly through which
suitable and appropriate customer base lead to get created. Thus, to get sustain into keen
competitive world, management have to implement customer loyalty and better relationship
events which facilitate them to remain competitive in consideration. This context will enables
them to accomplish their targets in an appropriate and suitable frame as well as appropriate
relationship with each and every user need to frame so that loyalty and retention of users become
possible.
Thus, various tools and techniques get underpin by management in consideration for
better results as it is clearly estimated that users are the most significant part of business which
never get detach (Tools of customer relationship management, 2017). Thus, to manage and
maintain effective relationship with users, several number of platforms get articulate which
enables in making and creating better relationship with users of a company (Chacour and Ulaga,
2015): E-mails: Customer relationship management is consider as an appropriate context in
business where, it become moral duty of managers to maintain suitable relationship with
users so that appropriate feedback could be gain as well as customer loyalty could be
maintain. This this aspect, major step or factor which could be consider by management
of a company is Emails. By providing relevant information regarding company product
and services through electronic mails, business become able to compete at market place
appropriately. Home base need to underpin this fact into business properly so that
efficient gain become possible
 SMS: Another consideration which could be opt by business to maintain effective
relationship with consumers is SMS. Business could deliver a feedback message to their
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clients at the time of delivery of their products and services so that beneficial feedback
could be accomplish in order to maximise effectiveness and efficiency. This is another
major factor or element which further support in appropriate customer relationship as
well as to gain their loyalty towards product and services of a company (Kerzner and
Kerzner, 2017).
All these are several important and essential consideration which need to implement by
Home base in their working through which effective customer relationship could be manage and
maintain with clients. As this will enable an association to grab and accomplish all major targets
in a better suited manner through which effective productivity could be done as well as customer
loyalty generated towards products and services.
CONCLUSION
It get articulate from a project that customers value need to get manage in an appropriate
and suitable manner. It enable business to grow and get develop in various section so that
appropriate and suitable gain become possible. In this aspect, business have to analyse customer
lifetime value in an appropriate and suitable manner so that chances of appropriate gain become
possible as well as management become able to accomplish their targets properly. With this
aspect, management have to evaluate all factors of customer lifetime value as well so that
appropriate and suitable gain become possible. With appropriate and effective investigation,
management have to determine suitable customer base and apply relevant strategy as well so that
better and efficient gain get done. Business to business and business to customers models also
get articulate properly through which appropriate and suitable decision making get done.
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REFERENCES
Books and Journals:
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Strategic Marketing Tool. In Proceedings of the 1998 Academy of Marketing Science
(AMS) Annual Conference. pp. 505-506. Springer, Cham.
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Goetsch, D. L. and Davis, S. B., 2014. Quality management for organizational excellence. Upper
Saddle River, NJ: pearson.
Kerzner, H. and Kerzner, H. R., 2017. Project management: a systems approach to planning,
scheduling, and controlling. John Wiley & Sons.
Kumar, V. and Reinartz, W., 2016. Creating enduring customer value. Journal of Marketing.
80(6). pp.36-68.
Leroi-Werelds, S. and et. al., 2014. Assessing the value of commonly used methods for
measuring customer value: A multi-setting empirical study. Journal of the Academy of
Marketing Science. 42(4). pp.430-451.
Martinsuo, M. and Killen, C. P., 2014. Value management in project portfolios: Identifying and
assessing strategic value. Project Management Journal. 45(5). pp.56-70.
Payne, A., Frow, P. and Eggert, A., 2017. The customer value proposition: evolution,
development, and application in marketing. Journal of the Academy of Marketing
Science. 45(4). pp.467-489.
Rihova, I. and et. al., 2015. Conceptualising customer‐to‐customer value co‐creation in
tourism. International Journal of Tourism Research. 17(4). pp.356-363.
Schwepker Jr, C. H. and Ingram, T. N., 2016. Ethical leadership in the salesforce: effects on
salesperson customer orientation, commitment to customer value and job stress. Journal
of Business & Industrial Marketing. 31(7). pp.914-927.
Stark, J., 2015. Product lifecycle management. In Product Lifecycle Management (Volume 1). pp.
1-29. Springer, Cham.
Taheri, B. and et. al., 2017. Mood regulation, customer participation, and customer value
creation in hospitality services. International Journal of Contemporary Hospitality
Management. 29(12). pp.3063-3081.
Verhoef, P. C. and Lemon, K. N., 2015. Advances in customer value management. Handbook of
Research in Relationship Marketing. pp.75-103.
Xu, C., Peak, D. and Prybutok, V., 2015. A customer value, satisfaction, and loyalty perspective
of mobile application recommendations. Decision Support Systems. 79. pp.171-183.
Online:
Tools of customer relationship management. 2017. [Online]. Available through:
<https://www.google.co.uk/search?
q=tools+of+customer+relationship+management&source=lnms&tbm=isch&sa=X&ved
=0ahUKEwiJtLCxlZHZAhVDuI8KHWVwArkQ_AUICigB&biw=1319&bih=604#img
rc=xArC8dJ25vAzfM:>.
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