Customer Value Management Report: Factors, Techniques, and Analysis

This report provides a comprehensive analysis of Customer Value Management (CVM), focusing on its application within the UK-based home improvement retailer, Homebase. The introduction defines CVM as a crucial link between customers and key performance indicators (KPIs), emphasizing the importance of understanding market trends to enhance sales and brand image. Task 1 explores the components of Customer Lifetime Value (CLV), including present value, customer loyalty, and mathematical formulas for calculation, along with the benefits of CLV to an enterprise. Task 2 delves into market segmentation strategies, differentiating between B2C and B2B decision-making models. Finally, Task 3 examines techniques to enhance customer loyalty and relationships, evaluating their appropriateness. The report highlights the importance of CVM in driving customer value, enhancing a company's image, and increasing profitability by retaining customers and offering tailored services. The study emphasizes the application of CVM principles to a business like Homebase to improve customer satisfaction and loyalty.

CUSTOMER VALUE
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Components that enable an corporation to determine & calculate customer's lifetime value
................................................................................................................................................1
P2. Benefits of customer lifetime value to an enterprise........................................................2
P3. Factors influencing the customer lifetime value..............................................................3
M1 The concept of customer lifetime value...........................................................................4
TASK 2............................................................................................................................................4
P4 Type of market segmentation that can be applied to a customer base..............................4
P5 B2C and B2B decision making models.............................................................................6
M2 Evaluation of segmentation..............................................................................................8
TASK 3............................................................................................................................................8
P6 Various techniques and methods to enhance customer loyalty and relationships.............8
M3 Appropriateness of techniques.......................................................................................10
D1.........................................................................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Customer value management is taken as a tool that creates a link between consumer and
KPI. This concept shows that superiors of a company has to manufacture products or services as
per trends of market (Hammer, 2015). In order to increase the performance of sale and improve
brand image, an association needs to measure the drivers of purchasing behaviour. This report
shows the impact of customer's behaviour on business of a company of UK named by
Homebase. It is a home improvement retailer firm which has founded by Sainsbury. Currently
this association needs to improve its sales by 20%. Therefore, this assignment discuss the
different factors which affect customer base and profitability of company if managers get success
in retaining them for longer period of time. For this assistance, employers need to take proper
decisions in understanding the value of customers through which they can provide high
satisfaction to them as well as gain their loyalty for long terms.
TASK 1
P1 Components that enable an corporation to determine & calculate customer's lifetime value
Managers of Homebase Company use customer lifetime value as a tool which forecast
the value through which they can generate high revenues. It is considered as an important part in
business environment because when people used to purchase goods and services in bulk then
such companies can gain a higher return on investment. Along with this, for enhancing
performance of business, associations requires to gain attention of loyal customers also. For this
process, management should make effective strategies and contribute more efforts in increasing
consumer value through which they can achieve business objectives in a proper manner. In
addition to this, CLV can be defined as a periodic value which shows the estimated value of 12
months relationship that is near about £x. Some major components used by managers of a
company for calculating Customer Lifetime Value are described as follows:
Present Value: This factor shows the perception of customers after acquiring services of
a company or footfall of them at outlets (Hollensen, S., 2015). It is like a discounted value
which depicts cash flow generated by customers. Along with this, it indicates value of money in
terms of time i.e. how long a customer will be retain with products.
Customer Loyalty: A CLV is totally depends on how long customers will retain with
firm's services and commodities. Therefore, associations always seek to get loyal customer
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which will help in generating high return on investment. While if people are not not loyal then
they will not connect with company's products for long time.
Mathematical Formula: CLV can be taken as monetary price also which can be
calculated by using mathematical formulae. Through mathematical operators, managers can
evaluate accurate value. For doing such type of calculation, they need to consider some
important factors like perception of customers, durability of time in which they retain with
products or services and total revenue gained by firm. In mathematical terminology it can be
shown as (Total revenue/Number of months customer taken the services). This formula derives
the more accurate result of average revenue generated by a customers at individual basis
(Kerzner and Kerzner, 2017).
Cohort Analysis: This type of analysis classifies the customers into some group or
community having similar characteristics like taste, lifestyles, purchasing power and more.
Through this process, managers can understand the demand and needs of people in large way as
well as completed the same within a short period of time. In addition to this, such analysis saves
time of completing the demand also.
Individualized CLV: In this step, people associated with firm used to measure the
demand and value of customers on individual basis. Since, measuring value of consumers
individually doesn't affect much on profitability but it represents a clear presentation of lifetime
value of particular person in a company.
Calculation of CLV= (Average Order Value) x (No. of Repeat Sales) x (Average of Retention
Time)
P2. Benefits of customer lifetime value to an enterprise
By measuring the Customer Lifetime Value, managers can evaluate performance and
image of an organisation at marketplace. Along with this, they can derive in which position
actually their company is. Through this process, employers can make modifications in
organisational activities and make creative and innovative products in order to get attention of
consumers towards its services. Furthermore, this type of concept also aid the firm in enhancing
the positive image at marketplace which increase helps in attracting more people. In context with
Homebase, this company used to make connection with customers through SMS and e-mail
services (Kim and et. al., 2015). Through this communication process, they provide information
to large number of people about its discounts and various offers. Effectiveness of such strategies
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could be reflect by measuring footfall of customers in its outlets. Some more benefits of CLV for
any business organisation are: Enhance goodwill of firm in market: Through effective customer relationship with
company, managers can gain success in organising and maintaining the image of
products at marketplace in positive way. It increases the goodwill of company as well as
keep the interest of consumers for long period of time also. These processes aid firm in
gaining the sustainability in market area and achieving the business objectives in a high
manner. Increase profit and ensure growth of company: Rapid change in technology aid
organisations in making good connection with customers. New techniques also help in
manufacturing products or services in high qualitative way (Kotler, 2015). Therefore, for
understanding demands of consumers as well as completing on time, an association needs
to adopt latest technology in organisational system. As discussed Homebase used to offer
its products on various attractive discounts and make aware to customers by mailing and
SMS services. Therefore, it helps in enhancing marketing by online services.
 Financial growth: This is the main benefit of CLV which helps in enhancing financial
growth of company at large manner. For this process, a company needs to acquire loyalty
of customers to retain them with product or services for long time. Price Setting: CLV depicts the purchasing power of particular group of customers
through which managers can formulate price strategies as per need of them. By providing
goods on affordable rates as per status of people helps in generating more and more
revenues as well as keeping their interest for long period of time also.
Difference between Customer Lifetime Value and Customer Value Management:
Customer Lifetime Value Customer Value Management
CLV reflects the present value of future cash
for a company. It shows perception of
customers or value of organisation attributed to
them during their relationship with business
products. Therefore, a company's managers
need to calculate it which helps in taking
important decisions in terms of sales and
CVM help associations in driving value of
consumers by measuring performance of
business in context with competitors present at
same marketplace (Pearson, 2016). Along with
this, it align efforts, concerns on scarcity of
resources as well as create sustainability of
business. Through this concept, managers can
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marketing along with product development
(Weinstein and Pohlman, 2015).
evaluate what customers actually look at for
completing their desires.
P3. Factors influencing the customer lifetime value
Since procedure of CLV is long and consumes much time, therefore, it is affected by
various factors which further impact on sales performance and profitability of company also.
Mainly this concept helps in determining retention of customers with products or services of a
company (Kotler, 2017). Through this managers can evaluate the perceptions of people also by
which they can identify purchasing power of buyers as well as what they actually need. In same
context, Homebase Company of UK use effective techniques for customer value management in
order to enhance the growth of business and profitability. By analysing factors present at internal
and external environment which could create an impact on CLV, assist employers to use
effective measures for minimising it on time. Some factors influencing the customer's lifetime
value are:- Lack of professionals: This factor depicts the lack of persons in a company who are
expert in measuring the value of customers by carrying out various techniques like
mathematical formulae, loyalty, retention and more. Therefore, a firm needs to recruit
professional persons in customer relationship management. Difficult to calculate: For evaluating the value of customers through calculations,
managers need to gain knowledge of some mathematical terminology (Kumar and
Reinartz, 2016). Since, without a correct formula, they cannot calculate the value of
customer value management. In addition to this, measuring accurate value of CLV is
sometimes very difficult for expert persons also due to insufficient information. Online and offline channels: In order to make effective connection with customers,
management of an association needs to latest techniques. They need to consider the usage
of online and offline channels along with their benefits and drawbacks. Through
evaluating the use of both procedures, managers are required to provide information
about products, offers and other services to customers on regular basis. It helps in making
connection with customers with long purpose.
 Size of organisation: size of a company also matters a lot as customers generally like to
purchase commodities of those firms which has large business organisation as well as
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effective image at marketplace. But having large number of customers create a complex
procedure for managers to calculate CLV in an accurate manner.
M1 The concept of customer lifetime value
CLV shows the value of cash requires to fulfil needs of future. Through analysing the
importance of this concept in business environment, a company can make effective relationship
with customers (Davis, Lockwood, Alcott and Pantelidis, 2018). This would help in increasing
profitability of firm as well as enhancing growth of business. In addition to this, CLV aid
organisations in gaining loyal consumers and retain them with products or services for a long
period of time.
TASK 2
P4 Type of market segmentation that can be applied to a customer base
Market segmentation reflects a procedure of segmenting the customers of a particular into
smaller groups having same characteristics, preferences, lifestyles, status, purchasing power and
more (Pearson, 2016). It would help in understanding the demand and need of specific group as
well as completing the same on time through which value of CVM can be managed in a perfect
way. Along with this, if managers can evaluate what actually a segmented group desires then
they can build strategies in terms of price, discounts and other offers accordingly. In addition to
this, it would help in calculating Customer Lifetime Value also in a perfect order. Therefore,
managers of Homebase used to fragment its large number of consumers into groups. Further, it
makes connection with customers by SMS services in order to inform them about its new offers
according to their interest level. Thus, these processes aid firm to improve their productivity and
profitability in a desired manner. There are various type of segmentation of market available
which can be applied to a customer base are:- Segmentation: In this procedure, customers are segmented on the basis of common
behaviour and general needs. Through this process, managers can offer their services
accordingly. Further, it also reveals the potential of powers like how much they can pay
for a particular commodity, so that a firm can offer that product on flexible rates.
Therefore, in this regard Homebase Company needs to grab information of its consumers
in a precise way through which its expert can calculate CLV in an accurate manner
(Rihova and et. al., 2015).
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 Targeting: In this step, a firm can target one or more than one group at a single time. For
this process, managers need to identify on the most attractive part of customers through
which they can offer products accordingly. For this process, they can take CVM as a tool
for evaluating demand of consumers in a more perfect way.
 Positioning: In this process, company finally deliver its products or services to customers
as per their need and on time through which managers can determine position of business
at marketplace as well as value of CLV can be enhanced.
Process of segmentation based on some factors as described below: Demographic: In this kind of segmentation process, groups are classified on the basis of
demographics like gender, sex, taste and society of customers. For this type of
procedures, managers need to collect all desired information about customers in a proper
way in order to evaluate their characteristics. Through this process they can enhance
production as well by improving sale performance in high order. Along with this, it will
help in retaining consumers with organisation in a more perfect way through which
managers can enhance CLV in a profitable way. In addition to this, for increasing
effectiveness of this process, employers used to provide information to customers about
its various offers and discounts by mailing and SMS services. Geographic: In this section, customers are divided on the basis of their region like in
which country they are actually belongs to. Along with this, such procedure also
classified people according to their profession also such as business persons, students and
more. Therefore in this regard Homebase concerns more on students base (Schwepker
and Schultz, 2015). Psychographic: This part of segmentation has done as per lifestyles, status, interest and
preference of population on individual basis. In this type of section, people generally
used to compare price of products with other companies before purchasing as well as they
also concern on brand image of firms whom goods they are availing. Therefore, in this
context, management of Homebase used to focus more on such type of customers who
are conservative much on pricing. In addition to this, they are also concern on luxurious
life of high status customers also through them company can earn more on particular
commodities.
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 Behavioural: This type of fragmentation is carried out on the basis of behaviour of
customers such as latest trend of marketplace. Through this process, managers can
evaluate the CLV in a proper manner (Stark, 2015).
P5 B2C and B2B decision making models
Decision making procedure is a complex task of every type of business organisation in
which managers take various responsibility to carry out operations in a proper way. In taking
decisions appropriately, employers are needed to analyse all the factors present at business
environment which influence the same either directly or indirectly. Further, decision making
procedure also depend on type of business in which it operates in. It includes type to business
dealing that are Business to Business and Business to Customers. Therefore, in order to enhance
the efficiencies, it is necessary for employers of Homebase to understand the role of both. Some
decision model are presenting below which are used in B2B and B2C as:-
Decision making models B2C B2B
Classical model of decision
making or rationale
It is one of the best effective
model of decision making
under which judgement is
made on the basis of business
transaction which is made with
consumers. This process can
be done by using a rational
model. Through this model,
managers can identify the
issues in more clear way. In
addition to this, classical
model of decision is generally
used by small business
organisations which have
clear and concise objectives.
In context with B2B, classical
model of decisions is
beneficial for larger
organisation. As through this
model they can operated their
business in a proper way. The
main reason behind usage of
this model in large enterprises
is that managers are not needed
to see various components of
decision making model.
Administration or bounded
rationality model
This type of model is used to
examine the main goal and
In B2B, technique of bounded
rationality model is used by
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objectives of a business in a
clear and concise way.
Through this methods,
managers can take proper
decision which affects the
overall performance and
productivity of business. In
addition to this, in B2C,
bounded rationality model
provides various options
through which management
can examine the effectiveness
of all and choose the best out
of them. This would help in
reducing the risks of taking
major decision which may
impact on business in negative
way.
senior managers of a company.
This would help in achieving
the set target in a given period
of time. In addition to this,
such type of decisions are
generally taken on considering
the major benefits of firm. This
model provides a large area as
well as several alternatives for
managers to select the desired
one.
Retrospective decision making
model
In this model, managers are
used to make effective
strategies through which they
can attract customers towards
products or services of
company as well as convince
them to buy the same in bulk
by informing them about
benefits of such services.
Retrospective decision model
under this assists top
management to provide
necessary information to
workers about scale of
business organisation so that
they can work accordingly.
Along with this, in dealing
with business to business,
employers or employees are
not needed to convince
customers for availing their
services (Weinstein and
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Pohlman, 2015).
M2 Evaluation of segmentation
Market segmentation is the most beneficial technique to identify requirement of each
customers as per status in a better manner (Tseng, 2016). This method also suggest the way
through which managers of a firm can fulfil demands of customers on individual level and retain
them for longer period of time. Along with this, creating segmentation aid enterprises in judging
behaviour of people, purchasing power of them and more. Through which, they can evaluate
how to attract them with commodities and gain loyalty of them as well.
TASK 3
P6 Various techniques and methods to enhance customer loyalty and relationships
Business of HomeBase Company is deals in service industry, therefore, it offer a wide
range of services to customers. Along with this, in order to grab attention of customers towards
its products, this firm used to offer services on various discounts and on affordable price. Its
managers use various techniques and strategies for getting high level of satisfaction of
consumers which aid organisation to get their retention with long term perspectives. In addition
to this, present firm also used to analyse needs and demands of people for completing the same
on time. In order to enhance customer loyalty and relationship, management of HomeBase use
various tools and techniques present at marketplace. It includes various distributive channels,
online and offline services etc. for making connection with consumers in a proper way (Xu,
Peak and Prybutok, 2015).
Further, for improvement sales performance, this firm use mail and SMS services to
convey its messages to large number of customers in a same time as per their needs and
purchasing power. This process would be taken as a fundamental objectives of every
organisation including HomeBase to develop a strong relationship with customers as well as
maintain the same for long period of time. For measuring the effectiveness of their relationship
with customers, managers can observe the footfall of persons in their outlets. In addition to this,
for measuring the Customer Lifestyle Value, managers need to concern on getting loyalty of
consumers also. Loyal customers are essential needs of every company as retention of them help
in generating more and more profitability in future also. As per current scenario, marketing
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manger of HomeBase Company are liable for providing world class services or products to large
number of customers in a proper way as well as on given period of time. They use following
techniques for making communication with customers and get their loyalty with business
objectives are:- E-mails: It stands for electronic mail method which is one of the most important online
application used for exchanging messages between two persons. Through this
telecommunication medium, a company can provide information about its services,
offers and new trends in an easy and quick manner (Hammer, 2015). In today's business
environment, almost all organisation used to make interaction with customers and
associated people by mailing. This method is easy to use as well as same message can be
conveyed to several persons simultaneously. In addition to this, from customer's point of
view, it is easy for them to place their orders, complaints, reviews and more about their
products. This method is also useful as people and organisation both can save messages
for longer period of time and in case of any default they can show the same as evidence
for further claim. SMS: Today all people use mobile technology for convey their message to many people
simultaneously. This type of method is much easy to use as well as cost effectiveness
also. Through this application, a company can offer its services to various people as per
their need (Tools of customer relationship management, 2017). The major advantage of
this method is that by use of it managers can determine how many customers are still
engage with their business. Along with this, by SMS service, a firm can not only give
reward to customers but also remind them about its latest services. Telephone: This is most common technique used by major portion of enterprises to
make connection with customers. This process shows its effectiveness when employers
of a firm used it in efficient and proper manner as well as within a plan of organisation.
It is a traditional way use to make conversation between two persons (Hollensen, S.,
2015). The major drawback of this service in this process of communication, only two
persons can connect with each other in a single time. But it is beneficial in understanding
the complete requirement of a customers by making direct conversation to them. As
compared with other application of communications, telephonic service is the best one as
it is easy to quick.
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