Customer Value Management: Analysis and Recommendations for Homebase

This report provides a comprehensive analysis of Customer Value Management (CVM), focusing on its application to Homebase, a broadcasting provider aiming to increase sales by 20% and enhance its SMS services. The report explores the components of Customer Lifetime Value (CLV), including present value, customer loyalty, and mathematical formulas, along with their benefits such as effective customer segmentation, price setting, and better forecasting. It also delves into the factors affecting CLV, such as product type, service levels, market stability, and company objectives. Furthermore, the report examines market segmentation strategies, B2B and B2C decision-making models, and techniques to increase customer relationships and loyalty. The conclusion summarizes the key findings and recommendations for Homebase to achieve its sales targets and improve customer engagement.

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....................................................................................3
P3 Factors that affect customer lifetime value............................................................................4
TASK 2............................................................................................................................................6
P4 Types of Market Segmentation Strategies applied to customer base....................................6
P5 B2B and B2C models of decision making and opportunities value creation can be applied 7
TASK 3............................................................................................................................................9
P6 Different techniques and methods can apply to increase customer relationship and loyalty 9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Customer Value Management is a concept that defines a relationship of consumers with
services or products provider companies. It is an approach of identifying how much a customer is
profitable to firm and what are the ways of calculating overall time in which consumer can be
retained by making higher buying from corporations. In this segment company monitors and
measures monetary value that it is possessing through a client. By providing extraordinary
quality services and goods management can enhances value of a customer for his corporation.
Present assignment is based on Homebase company which is a broadcasting provider and want to
improve its sales by 20% and currently is paying attention on increasing use of SMS services at
marketplace (Di Benedetto and Kim, 2016).
TASK 1
P1 Components that enable determination & calculation of customer's lifetime value
Homebase, a firm that uses a tool named as customer's lifetime value which is a
forecasting of value that a business entity derives from relation ship between him or his clients.
Nobody knows how far company's relationship will go with a customer. This kind of estimation
needs calculation of CLV that can be defined as a periodic value of a relationship that company
and its client have between them. For example a customer have attached with a corporation since
12 months and value of this period is £x.
There is a lot of elements that are available for affecting determinants of CLV. Details of
these points are described below: Present Value: This is a rate of consumer's repetitive purchase from a particular firm. It
is a discounted value of future cash flows generated by current consumer base. This
factor can be calculated with help of time value of money as customer lifetime value is
periodic price that is dependent on customer retention for company (Weinstein and
Pohlman, 2015). Customer Loyalty: CLV is a price that relies upon loyalty of a customer because this
loyalty helps in determining the period for which a customer will be retained with
association. For example if a customer is loyal then he will be connected with for longer
period of time. On the other hand if client is not satisfied with products and services that
company is providing to them then they will not get in touch for firm after their first
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purchase. More loyalty means more benefits and if less it means it will affect productivity
of venture negatively.
 Mathematical Formula: There are some experts that uses a numerical formula in order
to calculate value a life of consumer with corporation. Best usefulness of this
mathematical formula is that it put out a more accurate value that is helpful in better
decision-making. This formula comprises several factors like number of clients, total
revenue etc. For example it can be calculated as Total revenue ÷ Number of months
since customer joined (Goetsch and Davis, 2014). This formula mainly address average
of revenues generated by a buyer. Average value can said be as a more accurate numbers
by relying them company can make better and effective decisions. There are some other
formulas like:
◦ CLV = ((T x AOV)AGM)ALT
Here; T = Average Monthly transactions
AOV = Average Order Value
ALT = Average customer Lifespan (in Months)
◦ in Detail:
Here; R = Monthly Retention Rate
D = monthly Discount Rate Cohort Analysis: This is a study of a group of people that shares same kind of personality
traits. Speciality of this cluster is that whoever are included in this segment can be
analysed at same time in context of getting value of their life with enterprise. Main
goodness of this element is that it is not very time consuming as more than one person
can be analysed at same time but variations are very common in it that affect
determination of customer's lifetime value.
 Individualized CLV: To gain more accurate value then company uses this tool as it
focused on every single consumer's attitude and behaviour that he bring in corporation
along with his arrival. Firm can calculate this on past and present database. This data is
helpful in making presentations (Chacour and Ulaga, 2015).
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P2 Benefits of Customer Lifetime Value
In recent time there are so many business houses who have already started paying
attention on calculation of customer lifetime value. There is a debate on usefulness of this value.
After analysing this value when corporates got positive results then they accepted the truth of
fruitfulness of this aspect and then started using this tool into their operational activities. It
affects growth and revenue generation firm positively and also improves goodwill of company at
marketplace. Associations that want to stand out from competition then they use various tools
and techniques in order to make themselves different from other companies of same industry and
CLV is a new approach in this context. By taking help of this method corporate can grow their
operations that ultimately will generate higher productivity (Wouters and Kirchberger, 2015).
There are some advantages of this tool and are described as:
Effective Customer Segmentation – CLV aids operational activities by identifying
customer segments and profile because after knowing accurate needs and wants of clients, line
employers can use those methods in their task executions which are able in producing
customized products for buyers. This is tool that portraits an image of consumers whether they
are potential or not.
Price Setting – Customer's lifetime value also aids manager in setting a price of a good or
service by telling taste and preferences of consumers. This type of action is helpful in attaining
all targets in limited period of time along with gaining competitive advantages. This section
includes that customer lifetime value presents a capacity of a person in purchasing a product as a
consumer.
Better Forecasting – With help of identifying value of customer's complete lifetime with
association, manager can forecast future demand of buyers that will aid personnel in making a
right plan of activity's execution so that better outcome could be generated. It is helpful in
recognition of future demands around which all operational activities revolve. Homebase
company wants to increase his sales by 20% and to attain this goal it has to study lifetime value
of a customer in order to forecast all chances that can develop for enhancing sales. Referred
corporation can also find growth chances of SMS services. By making forecasting with taking
help of CLV, manager of company can identify opportunities regarding requirements of
organisation (Hammer, 2015).
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Re-invent Royalty of Management – Customer lifetime value works as an indicator of
need of improvising business activities for improving quality of goods and services which
corporation is serving to its clients and on this loyalty of clients relies. This value lighten up
those areas which are in need of improvement. Better understanding of behaviours of buyers can
be done through CLV (Kerzner and Kerzner, 2017). Better decision-making is to be promoted by
CLV as it enables manager of Homebase in redesigning their program that is helpful in
producing extraordinary services and goods to serve community.
Retention/Win Back of Customers – Customer lifetime value is helpful for Homebase in
identifying current use as well as future potential of enhancing use of SMS services as company
wants to increase use of this facility by 20%. By identifying needs and addressing them in
adequate manner organisation can win new customers along with retaining regular clients with
enterprise. For pointing accurate need by serving products it is necessary for association to
formulate strategies that are able in enhancing productivity of firm.
Homebase company uses customer lifetime value to forecast future opportunities and this will
tell how far a relationship between corporation and client will go. Nowadays. Customer lifetime
value is a very important tool because it provides assistance in getting accurate data related to
consumers and with this method is helpful in improvising business operations for winning back
clients towards organisation.
P3 Factors that affect customer lifetime value
Customer lifetime value consider as an estimation of future relationship with target
customer. It is a useful tool that aid marketing manager in knowing who all their loyal costumers.
It is mainly used to understand the buying behaviour of the customer. In addition to that, it assist
business enterprise in taking decision concerned with product development, customer support,
sales etc. CLV is considered as one of the most effective tool that help organisation in
understanding the loyalty and worthiness of customer and also determines how their value
changes with the passage of time. With the help of this tool, one can easily identify how loyal
customers are contributing in generating higher profits for the firm and up-to what extent (Stark,
2015).
Factors affecting Customer Lifetime Value are described below:
What type of product you sell: Customer maintain long term relationship with brands because
of its certain product or services that satisfies their needs and wants in a effective and efficient
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manner. However, if company fails to deliver that product then there might be chances of brand
switching. For example: Product life cycle of disposable nappies are limited to that extent till the
couple is having more children.
Service and Promise Level: It deals with how well company's product or service lives
up to their promises. For example: When a customer purchase new car, first two services are
considered as complementary services thus, these are free for them. But if company is unable to
effectively deliver such services to them, then in such situation customer gets disappointed and
shift to other product.
Market Stability: In rapidly developing market, it is essential for all business enterprise
to examine the needs and wants of potential buyer (Rihova and et. al., 2015). Frequent change in
the taste of consumer enable company to alter their product or services as per their requirement.
For example: Airtel is having maximum number of loyal customer as compared to other telecom
industry. Jio as its biggest competitor is immensely trying to attract their loyal customers. Jio is
offering data plan which is comparatively at lower rate which is mainly attracting the customer.
But apart from that there connectivity is much better than Airtel which become a reason for
switching the Brand. This shows how loyal customer is switching their brand as per the demand
of the market.
Company's Objective: Organisations that are financially strong and strategically
oriented companies possess more confidence in terms of long-term view of potential customer
lifetimes. Company's with higher net worth can easily modify their product or services as per the
needs and requirement of customer which is kept on changing frequently. For example: When
Apple launched its 8 series, within a gap of two months, they launch X series. This shows that
they frequently introduce the product in the market as per the changed requirement of the target
audience.
Above mentioned are the factors that plays vital role in affecting customer long term
value relationship. Customers are considered as the king of the market. Therefore, every firm is
required to critically take into consideration all these above mentioned factor that promotes
customer loyalty and customer retention for longer period (Minnema and et. al., 2018).
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TASK 2
P4 Types of Market Segmentation Strategies applied to customer base
Market segmentation is defined as division of marketplace according to potential
customers. This is to be used for recognition of buyers or whom managers want to address for
their facilities and goods. This segmentation that company does for making decisions related to
find persons whom management personnel can point for their servings and offerings. Reason
behind market segmentation is to identify those whom could be convert into persons who are
having purchasing power related to products and services so that Homebase could gain a
remarkable profit (Kumar and Reinartz, 2016).
Segmentation of marketplace is a division of market into sub sectors and division of
market relies upon those individuals who are possessing same kind of personality characteristics.
Now it is a responsibility of marketing department personnels that they must segment their in
two sections one is those individuals who do not use SMS services and other one is persons
whom use this facility. This kind of division is helpful in making decisions regarding sales could
be increased or not. There are five tactics that management can utilize to divide its marketplace
or population. These factors are described as beneath:
Demographic: It is a most common and easy pattern of segmenting market and this kind
of segmentation each organisation does whether they are small or big. Populations are
partitioning on the basis of some behavioural traits that are common in group. This partition
includes age, gender, religion, occupation, marital status, social class, education etc. With help of
this partitioning Homebase can assess those workers who are able in producing goods which can
satisfy customers fullest. As company is wanting to increase their customers for SMS facilities it
can use this kind of segmentation and because text messaging is a services that relies upon age
group. If there is a more number of customers then managers can develop this otherwise no
option or profit to build facility.
Geographic: IF manager want to be specific for their target customers then he uses this
kind of scission as it provides more accurate data related to its clients. This can be understood
with one instance which is, in first point manager found that there are sufficient number of
potential customers for which service could be developed but the area in which they live is not
that much developed and on general basis population of that region are facing network issue so
because of this reason they can not use SMS services (Raithel, Taylor and Hock, 2016). In this
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type of situations company rejects service creation as there is no option of using service without
network. As a solution, management can consult with government so that they remove network
issue and then organisation could be able in facility building for those who are having purchasing
power.
Psycho-graphic: In this portion those individuals to be comprises who are having same
sort of lifestyles, hobbies and interests. This kind of partitioning is more focused upon brand,
fashion and attractiveness instead of value of a product. In can be summarised that in this section
people are not conservative in thoughts and they want to possess their luxurious lifestyle. This
segmentation includes societal status, type of personality, interest of consumers, attitudes, beliefs
and values (Ramaswami and Arunachalam, 2016).
Behavioural: It is a new concept in market segmentation area as current time is an age of
digital world where anything could be done by taking assistance of technologies and digital
equipments. This kind of partition can be done through reports, surveys or trends. Manager can
also take sensitivity of price, brand loyalty and benefits into consideration for further division.
Combination Strategy: It is a combination of all above strategies and it is a most
prominent tactic that is using by Homebase in order to increase their sales volume by 20% with
help of developing SMS services. Nowadays corporations are not very particular in accepting a
single strategy but they choose tactics as per their need.
P5 B2B and B2C models of decision making and opportunities value creation can be applied
The process of decision making based on type of business decisions which has to taken
and also kinds of businesses are B2B and B2C. The Homebase organisation are looking for
better system of decision making and it will be helpful in increasing its effectiveness. Under this,
there are three different kinds of decision making models which Homebase company applied in
the Business to Business and Business to Consumers (Ascarza and et. al., 2016). These models
are given below as above:
Decision Making Models B2C B2B
Classical/ Rational Model  This is classical
approach in order to
taking better decisions.
 It is new way of doing
business related
operations and it does
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Business to consumers
is traditional business
form which uses the
rational model for
making the effective
judgement.
 It includes clear issues.
 It is effective or
beneficial for small
firms where aims of
company are clear.
not consist models of
decision making.
 Under this, issues are
very difficult or
complex.
 It is large scale
business operation and
also do not have proper
objectives for
organisation.
Bounded Rationality or
Administrative Model
 Under this segment,
model of decision-
making includes the
target attainments.
 In judgement, it is
necessary for Decision
maker should include
all essential alternatives
and also highlighted
them.
 B2C can be small size
business firm so under
this type of alternatives
are minimum. In
context to this
management should
 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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evaluate them in a
better manner.
Retrospective Decision-
making Model
 Under this section, firm
should try to
convenience consumers
for buy their products
at reasonable cost.
 There is no need to
businessman to go
anywhere because
customers come for
buy its services or
products.
TASK 3
P6 Different techniques and methods can apply to increase customer relationship and loyalty
Various techniques as well as methods are there which used by company to enhance their
customers base and at the same their also increase their profitability level. In this context, Home-
base is a company which deal in service sector and serve broadcasting services to its users. In
this they offer SMS facilities with in effective rate which aid in improving their market share as
compare to its competitors. Along with this, it is important for business organization to make
effective as well as successful plan which leads in creating strong customer base within their
business organization (Lee and et. al., 2015). Further, it is important aim for business
organization to have strong customers base in order to establishing their footprint in market
place. To attain better results, attaining customers loyalty is vital for company to attaining
competitive advantage in market. For attaining same company should provide quality services to
its target customers as per their needs and demand. In addition of this, loyal customer can help in
providing number of benefits to the company in which they easily enhance their performance
level at market place and take strong place form its rivals. In context of Homebase, manager
provide variety as well as quality services to its customers in order to attain their higher
satisfaction.
Along with this, various tools and techniques are there which used by manager to
improve relationship with their customers and also make strong bond between company and its
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