Customer Value Management: Strategies for Increased CLV Report

This report provides a comprehensive analysis of Customer Value Management (CVM) and Customer Lifetime Value (CLV). It begins by defining CLV and its components, including customer contribution margin, retention rate, discount rate, and acquisition cost, while justifying the benefits. The report then evaluates factors influencing CLV, such as service quality, communication networks, product offerings, and reward systems. It examines market segmentation strategies (geographic, demographic, psychographic, behavioral, attitudinal, and benefit sought) and evaluates B2B and B2C models. Finally, the report analyzes techniques to increase CLV, focusing on strategies for building customer relationships and digital strategies. The report uses Homebase and Vodafone as example companies.

CUSTOMER VALUE
MANAGEMENT
1

Table of Contents
INTRODUCTION...........................................................................................................................3
LO.1 Concept of customer lifetime value and the factors affecting it:............................................3
1.1 Various components of customer lifetime value...................................................................3
1.2 Justify the benefits of customer lifetime value......................................................................4
1.3 Evaluate the factors influencing customer lifetime value:.....................................................4
1.4 Concept of customer lifetime value, It uses in combing customer data in relation to B2B
and B2C.......................................................................................................................................5
LO.2.Different segments in customer base:.....................................................................................6
2.1 Types of market segmentation strategies...............................................................................6
2.2 Evaluate B2B and B2C models..............................................................................................7
P6) Analyse the different techniques and method in order to increase customer lifetime value 8
2) Evaluate the appropriateness techniques and method applied at different stages of the
consumer decision-making process and CLV..............................................................................9
3) concepts of customer lifetime value management in an organisation context.....................10
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11
2

INTRODUCTION
Customer value management is very important for measuring company consumer view of
the sensed value for wealth delivered relative to that of their competitors client. According to this
file managing the value of customer's interaction (Kotler, 2017). This report his very helpful for
understanding the consumer lifetime value. It also defining various types of factor which is
influences the clients. This report is also providing the different type of market segments in
customer base and their opportunities for value creation. It also includes the role of
segmentation, targeting , it is useful for identifying the lifetime value opportunities.
LO.1 Concept of customer lifetime value and the factors affecting it:
1.1 Various components of customer lifetime value
Customer are the key success to every organisation, the organisation cannot work without
there customer. The various components that enable the company to calculate it CLV are:
 Customer Contribution Margin: This refers to the customer contribution in the
profitability of the organisation. This is determined by the customer contributing to the
purchase of the product. It constitute of both the customer variable cost and the customer
revenue.
 Retention rate for the customer: This should always be high. The company tries to
maintain maximum number of customers to the organisation. It takes necessary action
and plans to reduce the customer from getting resented. Therefore, Homebase has
introduced the concept of E-mail and SMS to lure and maintain it customers (Kahreh and
et. al, 2014).
 Discount rate: This refers to the amount the business should invest on it marketing
operations to get maximum profits in the near future. The discount rate shows the value
of future cash flow of today money. The company has taken up the promotional events
providing discounts both through message and on stores.
 Customer Acquisition Cost:This is calculated to know how much the company has spent
3

on it marketing techniques in order to attract more customers to buy the products.
Example; the Homebase has introduced the technique of SMS and E-mail which has
boosted up more response and purchase from customer.
1.2 Justify the benefits of customer lifetime value Enables Marketing: Customer lifetime value enables the company to focus and prepare
the marketing techniques according to it targeted market, this helps the company to save
it time and money in long run. Helps in segmentation: This helps the company to segment it customer market
accordingly, the company is able to identify different groups and then revised and make it
marketing strategies for those groups. The company makes proper segments so to ensure
the proper targeting and positioning of the product (Bejou and et. al, 2013). Builds up Brand Loyalty: The most important thing is the brand loyalty a company
having good brand loyalty, then it will become easy for the company to win over there
competitors, and reduces the customer switch cost to other brands. This can only be
possible by having a better Customer Lifetime Value (Zeynep, Ata and Toker, 2012) Increases Sales: The better the CLV the more it will attract the customer and increases
the companies sales. Having trusted customers, the company can directly make a call or
promote there products through SMS and E-mail system to make customer pursue to buy
your product. Utilisation of resources: It helps the company to allocate and utilise it limited resources
in more effective manner. Return on investment: The Customer lifetime value helps the company to know that how
much a company should invest on it customer retention in order to get the maximum
value out of it.
 Time saver: Company is focused on it marketing strategies and know how much time
should be spend on it. This enables Homebase to modified it marketing techniques.
(Ekinci and et. al., 2014)
1.3 Evaluate the factors influencing customer lifetime value:
There are factors responsible for influencing and affecting any companies' customer
lifetime value they are:
4

 The service offered: The company should offered accurate and up to the mark services to
there customer. They should be treated in a well manner and in a proper way, the
complaints of the customer should be listened and should be worked on it. The Homebase
should offer a effective services to there customers (Chang, Chang and Li, 2012). Communication network: If the communication network provided by the company is
stronger and it provides wider options to choose from then it will attract more customers,
the company providing more options of communication like; E-mails, SMS, telephone
calls,etc. Further the company should upgrade it communication network and opt for
social media platforms. Products of the company: The products offered by the company should bare a feature of
attracting more potential customer for long run. If the company provides day to day home
essentials it will have more customer lifetime value than other company engaged in an
electronic business. So the Homebase should develop the products according to it
customer demands. Priorities given: If the company pays a proper attention to its customer , build goods/
service according to it demands, the customer should be acknowledged first, give
personal calls to regular customer, etc. this will build up sense of belongingness in them.
 Reward given: The happy and satisfied the customer the more will be the customer
service value. If the company pays certain rewards on regular purchasing, discounts on
occasions, offering of free gifts, etc. will keep a strong customer lifetime value.
1.4 Concept of customer lifetime value, It uses in combing customer data in relation to B2B and
B2C
Customers are companies the biggest assets they should be treated and handled in order
to build up the Customer lifetime value. The customer lifetime value refers to the relationship of
the customer with the company for it whole life (Lilien, 2016). This is calculated in a monetary
terms to know the net profit gained to the company by it each customers associated. The concept
of customer lifetime value will bring the profits to the companies pocket, enable it to run more
smoothly work more efficiently, this will help to select your target market and work on the
policy formulation according to it. It becomes more important to utilise the concept of Customer
Lifetime Value because it helps to get the relevant data in relation to its customers and it helps
the company when it is engaged in a B2B and B2C transaction i.e. :
5

 Strength your relationship with your customers.
 Help you to track your customers.
 Help the company to establish a long term planning.
 Encourage them to buy from you.
 Focus on your targeted customers.
 Maintain brand loyalty within your customers.(Verhoef and Lemon, 2013)
LO.2.Different segments in customer base:
2.1 Types of market segmentation strategies
There are various strategies of market segmentation applicable:
 Geographic Segmentation: In this segmentation market is divided into the geographical
areas i.e. Country: China, India, UK,etc., Region, Climate zone, Population density, City
or town size (Wedel and Kamakura, 2012).
 Demographic Segmentation: This segmentation is based on the demography of
consumers like; Age , Gender, Occupation, Income size, family size, Religion, Ethics,
etc. This is done because it is seen that the consumers divided in them will have come
interest, likes and dislikes, will motivate in same way.
 Psycho graphic Segmentation: This segmentation is based on the lifestyle of people, what
external factors they are most influenced from. This is done after the study of the interest,
opinions, activities of the customers. It is crucial segmentation and generally done for the
individual product at a time.
 Behavioural Segmentation: This segmentation is done on the behaviours of the customers
regarding the following products. It is more suitable than other segmentation has it makes
easy to segment the customers according to there behaviour it includes there Purchasing
habit, Loyalty, User status; regular user, first-time user, Buyer readiness; intention to buy
etc.
 Attitudinal Segmentation: It is done according to the attitude that customer have which
affects it decision-making/ behaviour for a particular product/ services they purchase.
This is will able to help the company to make a proper marketing strategies for it
customers and focuses on it demand and make product according to there demands and
needs.
6

 Benefit Sought: This is a new segmentation which divides the customer according to
what benefit they derived from the product. The company make product according to the
quality level and special features so the customers gets more benefits.
2.2 Evaluate B2B and B2C models
The company has set up a Direct B2B model so to get a direct connection to it trading
partner and getting all the information in relation to it business and asked the trading person to
share it information on a Electronic Data Interchange(EDI). The data is shared on the EDI the
company will ask the to choose the trading person to have it ERP(Enterprise Resource Planning).
Then there will be a set-up meeting to discuss the further formalities of the business, after the
completion of the whole process the company will start trading of with the other company/
person (Swani, and et. al, 2014).
The B2C Model established by the company i.e. the company has set up a network of
direct sellers that the company meets it customer demands directly through it brick and mortar
shops in traditional way, the company has established and Online intermediaries who worked on
the behalf of the company and shows the product of the company too much widespread
customers. There is an introduction of an advertising model which enables to promote and
publicises the product of the company through various channels of promotion like television,
newspapers, magazines, etc. The introduction of social media platforms for younger customers to
acknowledge and buy the company's product directly from these sites, so they get products easily
without getting involved in any physical activity. This will bring more customers beyond the
geographical boundaries.(Homburg, Stierl and Bornemann, 2013).
mission, such as reducing the complaints.
B2B Model: it is related with business to businesses process, it is very complex market unit.
Most of the people buy expensive product for their family like food item, cloths, other daily need
so people prefer the best product for their whole family (Kotler, 2017). Other than low risk with
value of product is low such as items like paper-clips, so that time it is create problem like what
to produce, it is very complicated process. Home based company make decision business to
business market dealing with whole seller, retailer, it main motive to earn profit but fulfil
customer need according to consumer demand. This model is very help full maintaining the
relationship with clients and it also helpful for expanding the business
7

Vodafone has effective strategies that has helped entity in managing its resources well and
minimizing wastage. That is why Vodafone has become able to expand its business in many
countries successfully. This strategic capability of the firm has supported in raising its band
image in the market.
LO3
P6) Analyse the different techniques and method in order to increase customer lifetime value
Home Base company make strategies for long term build their relationship with
customer's, they provide qualities product and full fill their demand as per clients demand. They
use some digital strategies like increasing their connectivity with consumer through social media,
applications, smart phones and online chat. They also use new technology such as cognitive
systems, internet it helps to collect all the information about new market trends or latest fashion
in market. This company establish their brand loyalty, they focus on their products proving the
best item in their exiting consumer as well a new target (Kumar, and Reinartz, 2018). This
company use cross selling and up selling means they identifying the product that are giving
satisfy additional, and fulfil complementary needs for example this HOME BASE organisation
providing comb they could be use cross sold to a clients purchased their product. It is prevalent
in every type of commerce, inducing insurances, agencies, banks they also use debit card, credit
card by cross sold.
Brand loyalty is the method of increase customer lifetime value, it is one of most
important assets for this HOME BASE company to attain their businesses. They used this
techniques for particular customer who are interested in brand loyalty. This method is very
effective it help to maintain trust and improving the buying power (Kotler, 2017).
Communications is also the best method to increase their sales and build-up relations with
customer. This company focus on increasing their sales and expand their work through effective
communication, they maintain strong relations with clients. Consumer services is an important
part of communication. If they are customer services communicate are not good so they will face
many problems. Make sure peoples have several customers services options, including emails,
phones, all other.
8

2) Evaluate the appropriateness techniques and method applied at different stages of the
consumer decision-making process and CLV
The consumer decision making process is refer with the five steps n which are related
with need recognition, information search, evaluation of alternatives, post purchase behaviour
and purchase (Kotler, 2017). These are steps are very useful for understanding the consumer
wants. One thing customer are not always move other it depend on the types of product, buying
stages of the clients. Stages of consumer decision making process are given below
Need- this is the first step it is very important for leading to buy of products and services,
HOME BASE company distinguishing the need of customer and work on it, they identifying
the different need and they try to fulfil their need in effective manner (Kumar, and Reinartz,
2018). They also focus on individual need and providing alternatives good and services. It
HOME BASE organisation aware of product that is better than current product, marketers like to
create new version of good and services in order to they use new technology through social
media they provide their services.
Gathering informations: after fulfil their customer need, home base company searching
information about their alternative selections that is very important to know consumer can
purchase their good and service they are satisfied their need or not , so this organisation take this
step is very help for searching customer needs (Kumar, and Reinartz, 2018). This firms main
aim to focus on their offer a best qualities of product rather than other organisation.
Evaluating of alternatives: this the third step it is consisted with alternatives available market.
HOME BASE company after gathering relevant information they try to select the best option
available as per customer need, taste and preference (Kotler, 2017). It is important aspect, it is
helpful for providing the quality product according to their income level.
Purchase of product or services: after evaluating the many alternatives HOME BASE company
going through all the above steps' consumer finally purchase their good and services. It is related
customer select and finally buy particular product as per their demand (Kumar, and Reinartz,
2018). This organisation also help to providing good product as per clients wants.
Post purchasing evaluation: it is the last step purchase of product is followed by post purchase
evaluation. It is referred with to consumer analysis the whether their services useful for people or
not or whether this company product fulfilled their customer need or not. This company concerts
to fulfil their client need in effective manner.
9

3) concepts of customer lifetime value management in an organisation context
Customer lifetime value management is very important aspect HOME BASE company
also work on customer value management (Flint, and Woodruff, 2014). Today consumer is the
kind of the market without client this organisation can not run their businesses for long time, so it
very necessary. This firms need to maintain their net present value for their economic benefits as
well as their company welfare. They focus on lifetime value as marketing metrics for placing
greater accent on relation with marketing for improving consumer services and providing long
term customer satisfaction, rather than on , maximizing shorts term sales (Kotler, 2017). The
main motive of this industry is providing customer satisfaction with effective product and
services. If this corporation is not focused so they do not achieve their target and do not maintain
their relationship with their consumer. They always try to ensure a greater deal for increasing
their customer satisfaction.
HOME BASE company estimate the customer lifetime value for whole consumer base it
is necessary for to estimated the total revenue that client is likely to giving s life cycle of the
product. Segment is based on customer on t value and this organisation maintained their budget
and relationship with old customer and new target customer (Keyte, and Locher, 2016). They
deal with customer easily through effective communication , it is very important for long run
businesses
CONCLUSION
It can be concluded that the customer's value management it is very important term this
file explaining all the method and techniques which is very help full for maintain the relationship
with consumer. This file also giving the best solution for businesses to consumer or business to
business model such these model are also very useful for increasing the marketing strategies and
improving their sales HOME BASE company. This file also include the various types method
these techniques help to increasing customer loyalty their product and developing number of
channels through social media , internet connectivity.
10

REFERENCES
Books and Journals
Kahreh, M. S. et. al, 2014. Analyzing the applications of customer lifetime value (CLV) based
on benefit segmentation for the banking sector. Procedia-Social and Behavioral
Sciences. 109. pp.590-594.
Bejou, D. et. al, 2013. Customer lifetime value: Reshaping the way we manage to maximize
profits. Routledge.
Chang, W., Chang, C. and Li, Q., 2012. Customer lifetime value: A review. Social Behavior and
Personality: an international journal. 40(7). pp.1057-1064.
Ekinci, Y. and et.al., 2014. Analysis of customer lifetime value and marketing expenditure
decisions through a Markovian-based model. European Journal of Operational
Research. 237(1). pp.278-288.
Verhoef, P. C. and Lemon, K. N., 2013. Successful customer value management: Key lessons
and emerging trends. European Management Journal. 31(1). pp.1-15.
Swani, K. and et. al, 2014. Should tweets differ for B2B and B2C? An analysis of Fortune 500
companies' Twitter communications. Industrial Marketing Management. 43(5). pp.873-
881.
Homburg, C., Stierl, M. and Bornemann, T., 2013. Corporate social responsibility in business-to-
business markets: How organizational customers account for supplier corporate social
responsibility engagement. Journal of Marketing. 77(6). pp.54-72.
Lilien, G. L., 2016. The B2B knowledge gap. International Journal of Research in Marketing.
33(3). pp.543-556.
Zeynep Ata, U. and Toker, A., 2012. The effect of customer relationship management adoption
in business-to-business markets. Journal of Business & Industrial Marketing. 27(6).
pp.497-507.
Wedel, M. and Kamakura, W. A., 2012. Market segmentation: Conceptual and methodological
foundations (Vol. 8). Springer Science & Business Media.
Kotler, P., 2017. Customer value management. Journal of Creating Value, 3(2), pp.170-172.
Verhoef, P.C. and Lemon, K.N., 2015. Advances in customer value management. Handbook of
Research in Relationship Marketing, pp.75-103.
11

Kumar, V. and Reinartz, W., 2018. Customer relationship management: Concept, strategy, and
tools. Springer.
Flint, D.J. and Woodruff, R.B., 2014. Marketing’s service-dominant logic and customer value.
In The Service-Dominant Logic of Marketing (pp. 201-213). Routledge.
Keyte, B. and Locher, D.A., 2016. The complete lean enterprise: Value stream mapping for
administrative and office processes. Productivity Press.
12