Analyzing Customer Lifetime Value and Market Segmentation Strategies

This report comprehensively analyzes customer lifetime value (CLV) and its significance for organizations. It explores the components of CLV, including constant margin, retention probability, and discount rate, and explains how these factors are used to calculate CLV. The report highlights the advantages of CLV, such as improved customer relationships, budget development, and opportunities for business growth. It also evaluates factors impacting CLV, such as technical quality, brand credibility, customer satisfaction, and confidence benefits. The report then applies the concept of CLV to Unilever, a multinational consumer goods company, and examines different market segmentation strategies, including demographic and psychographic segmentation. Furthermore, it evaluates various decision-making models and analyzes methods to enhance customer relationships and satisfaction, ultimately emphasizing the appropriateness of techniques at different stages of the consumer decision-making process to improve CLV. The report concludes by underscoring the importance of CLV in driving business success.

Enhancing the
customer satisfaction

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
P1 Explain and analyse the various components that enable an organisation to determine and
calculate a customer’s lifetime value...........................................................................................1
P2 Justification and explanation related to the advantages of customer lifetime value for the
organisation..................................................................................................................................2
P3 Evaluation of different types of factors which impacts the customer lifetime value of
organisation..................................................................................................................................3
M1 application of concept of customer lifetime value on Unilever............................................4
P4 Explanation related to different types of market segmentation strategies which can be
applied in different customer base...............................................................................................4
P5 Evaluation of different models of decision making................................................................6
M2 Critical evaluation of different models of segmentation in chosen organisation in relation
to the development of marketing intelligence for the improvement of customer lifetime value.7
P6 Analyses of different types of methods and the techniques used by the company to increase
customer relationship and satisfaction.........................................................................................7
M4 Evaluate the appropriateness of techniques and methods applied at different stages of the
consumer decision-making process and CLV..............................................................................8
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Customer satisfaction is one of the important and valuable aspect of the organisation as
all the policies and strategies of the organisation are developed in such a way to promote the
satisfaction of the customers. The satisfaction of the customers are depend upon the fulfilment of
needs and desire of customers. If the product and services of the organisation are developed as
per the needs and desire of the customers then it becomes easy for the company to gain their
loyalty because of their higher satisfaction. The needs and desire of customers are dynamic
which is changes according to the situation so it becomes important for the organisation to
applies innovative approach of business which helps the management to increase the satisfaction
level of customers. It is important for the management of the organisation to analyse the number
of new trends from the market and used them in company so that the organisation becomes more
updated and competitive towards the changes occurred in the market. The organisation which is
chosen here to demonstrate this report is Unilever plc which is Business to customer
organisation. It is a British multinational consumer goods organisation which provides range of
health care, food care, skin care products and many more to their customers in more than 190
countries of the world. This report is based on the evaluation of various components which helps
to improve the satisfaction of customer. This report justify and explain the customer lifetime
value and their benefits to the organisation also the factors which impacts customer life time
value. It reflects the number of segmentation strategies adopted by the organisation and the
decision making model of the organisation. At last this report reflects the description of different
factors which helps the company to improve the satisfaction and loyalty of their customers.
MAIN BODY
P1 Explain and analyse the various components that enable an organisation to determine and
calculate a customer’s lifetime value.
Customer lifetime value is one of the important matrix of the business under which helps
the organisation to measure that how much they earn from the average customer during the
course of their relationship (Anil and Satish, 2019). The differences in the cost, volume of
purchase and the frequency of the purchase makes the concept very difficult to be calculate by
the organisation. Customer lifetime value is one of the primary matrix which is important for the
understanding of customers towards the organisation. It is one of the valuable tool which
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enables the organisation to predict the relationship with their customers. This approach of the
business also allows the organisation to demonstrate the future value which the organisation can
be created from their customers. There are three components are present which helps to calculate
and measure the customer lifetime value by the management of the Unilever which are:
 Constant margin
 Constant retention probability per period
 Discount rate
 The formula for the calculation of customer life time value is
 Customer life time value =Margins *Retention rate/1+ discount rate- retention rate
 Churn rate :- It is related to the percentage of the customer which ends their relationship
with the organisation by shift their preference to other company. There are many models
which either use churn rate or retention rate and the given model used only churn rate
then the assumption is that it becomes constant (Balci, Caliskan and Yuen, 2019).
 Discount rate :- It refers to the cost of the capital which is used to discount revenue
from the customers. It is one of the important and valuable component of Customer
lifetime value under which different types of organisation has skipped to use this
parameter.
 Retention cost :- It is related to amount of money which is spent by the organisation to
retain their existing customers in the organisation. Different types of customer support
and incentives are came under this cost of the organisation.
 Period :- It refers to the interval of time which is divided for the analyses and the time
interval of year is the most common indicator which is used by the organisation to
calculate the customer lifetime value.
P2 Justification and explanation related to the advantages of customer lifetime value for the
organisation.
Customer lifetime value is the important indicator of the business which enables the
organisation to calculate the actual value which they can earn from their customers. The
management of Unilever are having large number of customers so it becomes important for them
to analyse the importance of the aspect because it helps the management to operate their business
in effective manner. The brief discussion related to the importance of the aspect are given below:
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Helps to improve client relationship :- The relationship of the customers with the
organisation is one of the most important and valuable aspect for the organisation which always
helps the company to earn value. If the relationship of the customers are positive and effective
for the company then it becomes easy for the organisation to maintain their customers for long
term. The concept of CLV helps the management of Unilever to analyse the level of customer
satisfaction then it enables the organisation to make changes in their approach according to the
situation (Debnath, 2019).
Helps to develop budget :- The concept of CLV is one of the technical aspect of the
organisation under different types of calculation are made by the management which reflects
number of costs bear by the company such as retention cost. If the company are having actual
data of the taste and preference then it helps them to develop the budget according to them.
Provide opportunity to reinvest for the growth of business :- The concept of CLV
enables the company to analyse the actual value which the organisation can be earn from the
specific group of customers. If the figures get by the company are not favourable then it enables
the organisation to target another section of the customers which protects the wastage of time
and resources of the company.
Helps to earn effective margins :- The concept of CLV helps the company to analyse
the returns they can be earn from the customers so it becomes opportunity with the organisation
to make the changes in their functions to make more margins and also helps the organisation to
conduct their business in effective manner.
P3 Evaluation of different types of factors which impacts the customer lifetime value of
organisation.
The application of the concept of customer lifetime value provide different types of
opportunities to the customers of the organisation under which the organisation can changes their
approaches and policies towards the customer on the basis of the situation. It helps the company
to increase the organisation to operate their business on the basis of practical approach and
enables them to make the changes in the organisation (Doppler, Steffen and Wurzer, 2020).
There are some factors are present in the market which impacts the CLV of company and the
brief discussion related to the same are given below:
Technical quality :- The technical quality of the organisation are having major impact
on the CLV of company. As the different types of informations and the data is required by the
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organisation for the calculation of CLV under which is grab by the technical staff of the
organisation. If the technology used by the company are updated and new then it becomes easy
for the staff to make comparative study of market trends
Brand credibility :- The credibility of the brand plays important role for the value of
customer which the company can earn for the given period of time. It is very important for the
organisation to have effective and high brand value because it enables the customers of the
organisation towards the product and services of the organisation.
Confidence benefits :- The confidence of customers should be high so that it becomes
possible for the organisation to achieve growth in the market. It is important for the management
to have confidence of customer high on them because it enables them to increase the CLV of
company.
Customer satisfaction :- The satisfaction of the customers plays important role for the
promotion of customer lifetime value as if the customer are satisfied with the products of the
company then it becomes positive for the CLV of company. It is important for the management
to have effective approach towards the needs and desire of customers because it helps them to
conduct their work in effective manner (Fauzi and Suryani, 2018).
M1 application of concept of customer lifetime value on Unilever
The management of Unilever is one of the important and competitive management of the
world under which it is required for the organisation to analyse the actual value of their
customer. This can be done on application on the concept of customer lifetime value for the
organisation. It is required for the management of Unilever to calculate retention cost, discount
rate and margins of the organisation. This help the company to operate their business in practical
manner because the organisation are having the actual value which their customer can provide
them.
P4 Explanation related to different types of market segmentation strategies which can be applied
in different customer base.
Market segmentation refers to those process under which the management of the
organisation has divide the whole population of the market into small denominations on the basis
of desired factors. These factors are common demographics (age, gender, etc.), geographic
location, attitudes, behaviours, or a combination of similar characteristics. All these factors
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important for the managers to be understand because it helps them to develop different types of
strategies in the organisation (Gunawardane, 2022).
Market segmentation is one of the important and valuable aspect of the business which
provided many benefits to the organisation. It is possible for any type of organisation of the
market to satisfy the needs of all the customers in the market so market segmentation is the tool
which enables the organisation to select the desired group of customer and target them with their
attractive products and the strategies. There are different types of market segmentations are
present in the market which can be used by the organisation and the brief discussion related to
the same are given below;
Demographic segmentation :- It refers to those type of segmentation under which the
management of the organisation divides the market on the basis of different demographic factors.
The demographic factors of the market are income, age, gender, religion, education and many
more. The management of company is required to choose some of the other factors and divided
the customers. It is important for the company to choose the specific group of customers
according to the nature of their products in the market.
Psychographic segmentation :- Under this type of segmentation, the management of the
company focuses on the interest and personality of the customer and makes the segmentation on
the personality traits of customers. The personality traits of customers are hobbies, personal
traits, values, beliefs life style and many more. The management of company compare the
features and nature of their product with the interest and personal traits of the customers so that it
becomes easy for the management to analyse the targeted customers. This help the organisation
to protect the management from the failure of product and strategy in the market (Lee, Lee and
Koh, 2019).
Geographic segmentation :- In all the methods of market segmentation, geographical
segmentation is one of the easiest method which the organisation can be applied. This type of
segmentation are conducted by the organisation on the basis of the region or the geographical
area. This parameters which is used by the company under this market segmentation are country,
city, region and many more.
Behavioural segmentation :- It is possibly the most useful of all for e-commerce
businesses. As with psychographic segmentation, it requires a little data to be truly effective –
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but much of this can be gathered via your website itself. Here we group customers with regards
to their:
 Spending habits
 Purchasing habits
 Browsing habits
 Interactions with the brand
 Loyalty to brand
P5 Evaluation of different models of decision making
Decision making is one of the important and valuable function of the organisation which
the management of Unilever has to take at the time of conducting their business in market. There
are large number of critical problems and difficulties has to faced by the organisation under
which the managers of the organisation need to take effective decision for their solution. There
are different types of strategic models are present which can be used by the organisations for
making the decision and the brief discussion related to the same are given below:
Rationale decision making model :- It is related to those model of decision which is
used by the organisation under those circumstance where are nature of problems are very critical.
The organisation need to consider the following steps for the application of this model of
decision making (Otto, Szymanski and Varadarajan, 2020).
 To elaborate or define the problem
 To identify the criteria which is used to analyse the possible solution of problem
 To decide the importance of each criteria which is analysed
 To generate the list of possible alternatives.
 To determine the best solution
Bounded rationality business model :- Bounded rationality describes the way that
humans make decisions that departs from perfect economic rationality, because our rationality is
limited by our thinking capacity, the information that is available to us, and time. Instead of
making the 'best' choices, we often make choices that are satisfactory. It is important for the
management of the organisation that they often choose those alternative for decision making
which provides them maximum satisfaction because it helps them to under the situation more
accurately and solve them in effective manner (Prakash and Srivastava, 2018).
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Recognition-primed decision-making model :- It is process which is followed by the
organisation for the making of effective and accurate decision in wicked situation. It is one of
those model of decision making which helps the organisation to solve different types of wicked
problems in their life.
M2 Critical evaluation of different models of segmentation in chosen organisation in relation to
the development of marketing intelligence for the improvement of customer lifetime value
There are number of model and theories are discussed above the report such as
geographical, psychological and many more which can be used by the organisation for the
segmentation of the market. The management of Unilever has operate their business in different
countries of the world under which large number of customers are connected by the organisation
which enables the management to make effective segmentation of the market. The management
of company has conduct the segmentation of the market on the basis of psychological factor
under which the factor of age becomes the primary concern of the company. The management of
company divide their customer base in three groups such as children, young age and old age. The
product line of the company are developed the product to different age groups (Ribeiro, 2022).
P6 Analyses of different types of methods and the techniques used by the company to increase
customer relationship and satisfaction
The loyalty of the customers is one of the most important and valuable factor for the organisation
because it helps to improve the long term benefits for the company. There are different types of
ways are present which can be used by the organisation to improve the loyalty of customer which
are given as under:
Know the customer and let them know you :- It is important for the company to have
effective analyses about the taste, preference and behaviour of customers if they want to improve
their loyalty. If the products of company promotes and satisfy the preference then the loyalty of
customer increases.
Create customer loyalty programme:- It is related to those programme under which the
management of company provides number of benefits to the customers in excess of their service
as it helps to improve their attention
Engage customers on social media :- It is important for the company to have attractive
existence over the platforms of social media which helps the company to grab the preference of
customers because of high reach of the customers (Rukhsana, 2019).
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M4 Evaluate the appropriateness of techniques and methods applied at different stages of the
consumer decision-making process and CLV.
The techniques used in decision making process of the organisation should be effective
and makes them able to improve the solution of problems. The rational decision making model is
one of the effective model of decision. This model enables the organisation to analyse the
situation in effective manner provide different alternative options and makes them able to solve
the problem in effective manner (Wang, 2020).
CONCLUSION
It is concluded from this report that the calculation of customer lifetime value is not the
simple task for the organisation as the management of the organisation has to make different
types of research and analyses of market. This report concludes various components which helps
to measure the CLV and also the number of models which helps the organisation to solve
different types of problem. This report concludes various technique of market segmentation
which helps the organisation to segment the market in effective manner.
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REFERENCES
Books and Journals:
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management practices–an empirical examination. Total Quality Management &
Business Excellence, 30(13-14), pp.1528-1548.
Balci, G., Caliskan, A. and Yuen, K.F., 2019. Relational bonding strategies, customer
satisfaction, and loyalty in the container shipping market. International Journal of
Physical Distribution & Logistics Management.
Debnath, R.M., 2019. Enhancing customer satisfaction using Kaizen: a case study of Imperial
Tobacco Company (ITC). Journal of Advances in Management Research.
Doppler, S., Steffen, A. and Wurzer, L.M., 2020. Event catering: enhancing customer satisfaction
by creating memorable holistic food experiences. In Case Studies on Food Experiences
in Marketing, Retail, and Events (pp. 133-145). Woodhead Publishing.
Fauzi, A.A. and Suryani, T., 2018. Measuring the effects of service quality by using CARTER
model towards customer satisfaction, trust and loyalty in Indonesian Islamic
banking. Journal of Islamic Marketing.
Gunawardane, G., 2022. Enhancing customer satisfaction and experience in financial services: a
survey of recent research in financial services journals. Journal of Financial Services
Marketing, pp.1-15.
Lee, M., Lee, S.A. and Koh, Y., 2019. Multisensory experience for enhancing hotel guest
experience: Empirical evidence from big data analytics. International Journal of
Contemporary Hospitality Management.
Otto, A.S., Szymanski, D.M. and Varadarajan, R., 2020. Customer satisfaction and firm
performance: insights from over a quarter century of empirical research. Journal of the
Academy of Marketing science, 48(3), pp.543-564.
Prakash, G. and Srivastava, S., 2018. Role of internal service quality in enhancing patient
centricity and internal customer satisfaction. International Journal of Pharmaceutical
and Healthcare Marketing.
Ribeiro, L.S.C., 2022. The role of company’s website characteristics in enhancing the B2B
customer experience (Doctoral dissertation).
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Rukhsana, J., 2019. Enhancing Customer Loyalty Through Service Quality: Reviving Strategic
Competitiveness of Pakistan International Affairs (Doctoral dissertation, Abasyn
University, Peshawar).
Wang, C.C., 2020. Corporate social responsibility on customer behaviour: the mediating role of
corporate image and customer satisfaction. Total Quality Management & Business
Excellence, 31(7-8), pp.742-760.
Yi, Y. and Nataraajan, R., 2018. Customer satisfaction in Asia. Psychology & Marketing, 35(6),
pp.387-391.
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