Customer Value Management: CLV, Segmentation, and B2B/B2C

This report provides a comprehensive analysis of Customer Value Management (CVM), focusing on the concept of Customer Lifetime Value (CLV) and its application to Homebase Company's SMS broadcast campaign. The report explains the components involved in calculating CLV, including customer lifespan, retention, average profit, and churn rate, and differentiates between historic and predictive CLV methods. It highlights the benefits of CLV to an organization, such as improved business assets, customer segmentation, complaint management, customer retention, and ROI. The report also identifies factors influencing CLV, including consumer purchasing behavior, customer loyalty, and service quality. Furthermore, it explores different market segmentation strategies like demographics, geographic, psychographics, and behavioral segmentation, and examines B2B and B2C decision-making models in relation to customer value creation, using Homebase as a case study. The report concludes by discussing segmentation models in both B2C and B2B contexts and their impact on customer value creation.

CUSTOMER VALUE
MANAGEMENT

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INTRODUCTION
Customers are significant part of an organisation and plays important role to contribute
in the overall profit of the firm. Customer Value Management assists the company in order to
determinine different drivers which can valued the customers. Along with it helps in measuring
the performance of the firm relative to the competition, align efforts and focus on scarce
resources.
The present report is based on Home-base Company that initiated a SMS broadcast
campaign to support its DM activity with promotional offers. This report covers various
components that enable the firm to determine and calculate a customer’s lifetime value. Along
with, benefits of customer lifetime value to the organisation is explained. In addition, types of
market segmentation strategies which can be applied to a customer base will be determine.
LO 1
a.) Various components that enable the firm to determine and calculate a Customer’s Lifetime
Value(CLV)
Customer play important role in order to form value for the company. Customer lifetime
value can be defined as the amount of value contributed by customers to the business over their
lifetime. Homebase Company needs to understand the importance of CLV. Through looking
toward CLV company can easily define its marketing goals and sales strategies. The satisfied
loyal customer-based helps company in gaining high profits and assist to meet its target goals. It
is essential for the firm to maintain and sustain customers for longer time. (Leroi-Werelds and
et.al., 2014).
CLV is known as the standard measurement of a company’s net profit from its specific
customers. Customer lifetime value is one of the important applications that can frame a better
understanding of customer acquisition cost. Also, helps in revealing a lot about the health of
business model. Without measuring CLV it can become tough for the firm to understand its
protentional customers (Verhoef and Lemon, 2013). If company do not measure Customer
lifetime value then they cannot acquire customers whose lifetime value is not worth the cost.
After identifying targeted group of customers, company can easily focus on providing customer
service tailored to their needs and make sure that they stick around it toward the long term
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customers. To calculate CLV, it is important to look at the length if the customer lifespan,
retention, the average profit and customer churn rate etc.
There are various methods to calculate CLV. These are simple and traditional formulae
and is divided into historic or predictive, depending on the data used.
(1) Historic CLV: It is the sum of all profits from a customer past purchase as it is a
number which is based on existing customer data from a specific period if time.
(2) Predictive CLV: It permits projecting how much income an individual can generate
for the business in the course of the customer relationship. It is considered as one of
the more complete methods of measuring CLV (Stark, 2015).
In a predictive method, a transaction history and behavioural pattern used for determining
the current value of a customer and for forecasting the way customer value can evolve with time.
In this, more data is gathered to acquire accurate results.
The simple Customer lifetime value formula: It is one of the basic way which help in
determining CLV is added up to revenue earned from a customer – the initial cost of acquiring
them(Raithel, Taylor and Hock, 2016). This simple approach can be used at the time when
customers annual profit contribution remains somewhat consistent. On the other side in
traditional formula annual sales per customers are not relatively flat, as it is more in depth CLV
equation is needed.
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Figure 1 Customer delivered value
b.) Benefits of CLV to the organisation
The approach of Customer lifetime value leads to impact on the firm such as Homebase for the
betterment of all business activities. There are some significant benefits of CLV which are as
follows:
Business assets: Customer lifetime value helps in providing exact idea related to the total
assets owned by the firm in effective manner.
Customer segmentation: The CLV process assists the firm like Homebase to segregate and
classify the customers. It assists in identifying differences between its potential customer and
regular customers and in enhancing the customer satisfaction at Homebase.
Complaint management: Complaint management is the process of CLV to assist and
sort out the problems related to the firm. This helps Homebase firm to take right decisions to
solve problems (Nasution, Mavondo and Ndubisi, 2011), along-with improving the productivity
of Homebase.
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Sustain the customers: It is an effective approach which helps company in retaining and
sustaining their customers by adopting right steps to help in accomplishing the fulfilments of
needs and requirement and have sustainable consumer loyalty toward the Homebase.
Better return to investment: The process of CLV is effective as it assists company to take rigjt
measure for meeting the needs and wants of the firm. It will help firm like homebase in order to
have high shares and meet the needs and wants of customers. Hence, it can be stated that better
ROI will help company to get better output to its customers and stakeholders.
c.) Factors influencing the customer lifetime value
There are various factors affecting the CLV of Homebase Company. These not only
influence the CLV but also helps in understanding the needs and requests of customers (Flint,
Blocker and Boutin Jr, 2011). Some factors that affect CLV are as follows:
Consumer purchasing: The purchasing power of customer puts high and significant
impact on the operation of the firm. It is because customer making again purchased teh products
and services when they are satisfied from first buying. Therefore, Homebase needs to focused on
providing high quality service to customers (Nagaoka and et.al., 2016. Along with purchasing
capacity help company in understanding demand of their product in market.
Customer loyalty: It is an important element needed to be considered by the firm to
enhance its sales and profit. The loyal customers are helpful for Homebase Company in order to
gain high productivity and meeting all the needs and requirements of customers.
Service by company: The services and products which are produced by the Homebase put
significant impact on the firm and its operations. Hence, satisfied customer makes repeated
purchase of products which help company in gaining success.
Apart these, there are other factors affecting CLV to build a better relationship, better
discounts and rewards for becoming loyal customers and providing better after services (Verhoef
and Lemon, 2013).
d.) Concept of CLV
It is known as the measurement and prediction which is based on the collect of different
sort of customers related data which help the firm in determining the better services and gain
profit. Along with this, it helps company in gaining a better ideas related to resources which is
used by customers and revenue which is gained by firm in return. The Customer lifetime value
assist homebased in order to gain better ideas related to the resources which is used by customers
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and revenue gained by the firm in return. Hence, this process is deeply based on the collection of
the customer data which assist firm to make the suitable measures (Nasution, Mavondo and
Ndubisi, 2011).
B2B interaction is done between business related to generate sales and profit. On the other hand,
B2C interaction is between consumer and business that helps business to gain information
related to the consumer’s specifications. B2B is the system in which firm and business sales the
service and product to other business. While in B2C services is provided to customers. At the
time of B2C data collection, company can easily gain information related to the products and
services and meets the requirement of customers.
LO 2
1.) Different Types of Market Segmentation Strategies:
This segmentation defines part of broad consumer or business market. , normally it is
divided into sub-groups having characteristics like common interest, needs, similar lifestyles or
similar demographics. A market division scheme organize customer or business base along
demographics, geographic, behavioural or psycho-graphic (Cross et.al, 2015).
Those segmentations are determined structure or variety who filling by consumer. As the market
strategy can applied both suppliers and buyers and those type of plan of action can applied to
target custom-base and those given-
 Demographics- These is very similar and parted consumer on the construction of people
characteristics, such as: income, marital status, social class, age, gender, education,
religion. In this segmentation, a customer fills about his details which should be true.
(Johnson, G, 2016). This division includes the personal information of consumer.
Personal status etc.
 Geographic- In this, the customers should include their location details like– state,
country, college, community, international marketing. Here, in simply geographic
means the customer's add there destination details in structured form. The customer's
have responsibilities to fill there address truly. (Flint, Blocker and Boutin Jr, 2011).
 Psycho-graphics- This is a lifestyle based segmentation, targeting customers’ hobbies
and interests. It caters to a nice market with price, quality and brands recognition are
more important and attractiveness (Weinstein, and Cahill, 2014).for example interest,
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social status, personality types, attitude, opinions, values. The customer should fills
those form according to their interest there hobbies and their relationship status. This
division includes the information about our life style.
 Behavioural- This segmentation is related to customers characteristics and there
company collective information. It includes- usage pattern, price sensitivity, brand
loyalty and benefits sought. If a customer wants the best products and services digitally,
he is more likely to buy it from amazon.com and its online department wants to fill a
form by him (Baker, 2014) to deliver goods to his location area
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2.) Business-to-business and business-to-customers decision making models
B2B and B2C are the two forms of commercials transaction. B2C refers to business-to-
consumer and B2B refers to business to customers.which are processes of selling
products or services.
Business-to-business decision-making model- This model involves transaction between
businesses include wholesaler and manufacturing and retailer or wholesaler. Business-
to-business define that enterprise is included with organization, rather than betwixt a
organization and individuals costomers (Verhoef and Lemon, 2013). The business-to-
business is supplying chain where the business between one company to another
company. The B2B role in customer value creation is, the customer who started a new
business and they trying to increase there business, the customer can interact with other
company for the business deal, if the other company accept the deal. The customer
started working with company (Mencarelli, and Riviere, 2015). The customer value
creation determine that what customer needed, what customer wants to pay. In the Hanse
as Company they made a connection with customers via online or SMS, the company
have to communication to customer via SMS it is more responding to other online
service. The Home-base manger trying to involving the emails service but its not better
work according to SMS service.
Business-to-consumer decision model-
 This operation is included the consumer and company , which those end-to-end
custoerms of servcice amd prodcuts. It is defined the enterprise is directly consumers
(Xu, Peak and Prybutok, 2015). Most of company started business directly with
consumers and they trying to started business individually with customers. The main
objective of B2C is to directly supply goods and services to customers. Here, the
company directly sells their products to customers it can also include online selling
(Anwar, 2017). The Home-base company has also use this models to direct sells with
customers. The company directly sells there products via online or via SMS, the Home-
base company has more use SMS service because the SMS service increase company's
growth. Because the customer's reaction via SMS is more effectible according to emails.
The company manger have to define the all functionality of communication fields
(Kleiner, 2016). B2C models are customer friendly and essential for overall development.

For e.g. Homebase company manager motivates all the employees to work directly with
customers. To increase sales and also on how to increase profits via online
communication.
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3.) Segmentation models in both B2C & customer value creation
B2B segmentation- In B2B segmentation defins the cutoerms demanmds and supplying to one
orgnizations to another orgnizations they also reppresnt the scheme to support busbniess planing
and and there tactics of orgniations is also reprsent the operations of busniess and thier
functionality (Reijonen,et.al, 2015). the segmentation of business-to-business models simple
concluded that the company started business with another company, they exchange there goods
and service according to market demands, they also gives financial supports to another
company.
B2C segmentation- The business-to-consumer segmentation refers to the company which
aims to introduce brands called “supreme” to the market. The business-to-consumer
segmentation focused on the organizations and the individual’s buyer. The segmentation is refers
to the organization which included the service within the business-to-consumer.in the business-
to-consumer there have five characteristics which is demographics, psycho-graphic, geographic
and behaviour based (Zhu, 2015). The Business-to-consumer is also related to customer value
creation it also include what kinds of relation connect to customer, how to customer's can adopts
this service. How to company manage customer demands. The customer value creation is based
on the new technology. This technology works in digital platforms. Those customer relation
based on online strategy.
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LO 3
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CONCLUSION
From above report, it is concluded that customer lifetime value (CLV) plays a significant
role to increase sales and profit of the firm. It must be understandable that customers plays
significant role in expansion of their firm and for gaining competitive advantage. There are
different methods through which customer lifetime value can be measure which help in making
changes in products and services of the firm.
Customer loyalty is one of the important elements needed to enhance sales and profit.
Also, inferred that for a firm it is important to understand different aspects through which
customers make purchase decision. Along with this they need to make product according to
those changes so that their firm sales and profit can be enhanced. There are various types of
market segment which can be considered by the firm such as B2B market and B2C market. Not
only customer lifetime value there are many other methods which can be followed by firm which
help them measuring customer’s satisfaction level.
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REFERENCES
Books and Journals
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