Customer Value Management Report: Strategies for Customer Loyalty

This report delves into Customer Value Management (CVM), exploring its significance in determining customer views, measuring competition, and creating a competitive advantage. It examines the components of Customer Lifetime Value (CLV), including customer acquisition costs, repeat transactions, and customer retention rates, while also highlighting the benefits of CLV, such as customer segmentation, brand loyalty, and cost savings. The report evaluates factors influencing CLV, like market stability, company objectives, and product types, and discusses CVM within both B2C and B2B contexts. Furthermore, it analyzes market segmentation strategies, including demographic, psychographic, behavioral, and geographic segmentation, and evaluates B2C and B2B decision-making models for customer value creation, along with segmentation models like firmographic, tiering, and need-based segmentation. Finally, it explores techniques and methods to increase customer relationships and loyalty through Customer Relationship Management (CRM).

CUSTOMER VALUE MANAGEMENT

Illustration Index
Illustration 1: Consumer Decision Making Process.......................................................................12

INTRODUCTION
Customer Value Management or CVM is a measure which helps to determine company's
customers view, measures performance of the competition, focus scarce resources and create
your sustainable competitive advantage. It is a very powerful tool used in any business as it is
directly linked with the customers of company. Many factors affect the customer value
management which will be discussed in this report like benefits of customer lifetime value and
the factors that influence the customer lifetime value in the organization. Different types of
market segmentation strategies related to CVM and different models to demonstrate
opportunities for customer value creation will also be focused.
TASK 1
A) Analysing different components that enable the organization to determine and calculate a
customer’s lifetime value:
The amount of value a customer contributes to the business over their lifetime is known
as Customer lifetime value (CLV). It can help in setting marketing goals and sales strategies
encourage existing customers to spend in company's business. There are various components
which determine and helps to calculate the customer's lifetime value, such as understanding
customer acquisition costs, repeat transaction and customer retention rate.
 Customer Acquisition Costs (CAC): It is that one matrix which can determine company's
future in the market. CAC is that cost which is linked by the customer to buy company's
product or service (Di Benedetto, C.A. and Kim, K.H. 2016). It is an important task to
acquire new customers.
 Repeat Transaction/Purchase Rate: The percentage of the current customer base of the
company that has come back to shop again is known as Repeat purchasing rate. It is a
good measure of loyalty, to evaluate performance.
 Customer Retention: To increase their number of repeat customers and their profitability
is known as customer retention. This rate enables to extract more value from existing
customer base.
B) Benefits of customer lifetime value to the organisation:
Apart from its potential challenge in market, customer lifetime value is a strong business
tool which can be applied by company gain benefits. In particular, it helps the organization in
several ways, such as,

 Customer Segmentation: This segment enables the business to differentiate the customers
on the basis of long term profitability, through which they can decide, to change their
market strategy or not.
 The Largest Business Asset: It provides the image of company's largest asset. This
enables the organization to evaluate if they moving in right direction or not.
 Brand Loyalty: Copying services can be easy for the competitors but customer loyalty
towards them creates the good image. Customer loyalty is very difficult to copy by the
competitors (Flint, D.J. and Woodruff, R.B. 2014).This helps to maintain the brand
loyalty in market.
 Early Warning Signs: It helps to identify in which segment of the business, the problem
has arisen, so that appropriate measures can be taken by them to overcome that issue.
 Saving Money: When company knows what their customers are seeking for, it becomes
easy to serve them. As its cheaper to maintain the old customers than making new ones.
This helps to save money and make profit.
 Better Marketing: Customer Lifetime Value leads to marketing which focuses on the
customers. This helps to promote their products in the market.
 Saves Time: Focusing on the target market and loyal customers, it will save time and
money by not wasting effort on other things.
 Balance Short Term Results And Long-Term Goals: In order to get short-term
profitability and longer term goals customer lifetime value helps in making better
decision. (Kleiner, G. 2016).
These are some benefits which shows how valuable the calculation of Customer Lifetime Value
can be for them.
C) Evaluate the factors influencing the customer lifetime value:
There are several factors which can affect company's customer lifetime value in great
manner, such as,
 Market stability – In rapidly developing world, it is difficult to be stable in the market. To
overcome such problem, company should come up with marketing strategies with
innovative ideas.

 Company Objective: This is the main factors which the company has to focus on. Being
financially strong and strategically-oriented in the market, will make them to gain a long-
term view of customer lifetimes values.
 Type of Product selling: What products company is offering to their customers has great
impact on the market. There will be a longer ‘lifetime value’ associated with some
products, for example, products which are associated with young children like baby food,
will have a defined customer life value.
 Service and promise levels: There is great importance of the services you are providing to
the customers in order to make them happy. Serving customers well in the business will
help to increase the customer lifetime value for company, which will help them to stay
strong in the market (Kumar, V. and Reinartz, W. 2018).
D) Concept of customer lifetime value within a specific organizational B2C or B2B context:
Customer Lifetime Value (LTV) is defined as the revenue that a business will generate
from each customer over the length of the relationship, considering acquisition and retention
costs. LTV is known to be widely used in B2C market. This concept can be used to illustrate the
possible dynamics of the customer lifetime value. Customer Lifetime Value is based on the
relationship between the company and its customers. Some key factors which can be applied to
increase the CLV, are
 To make marketing accountable there is so much of pressure on company.
 Problems such as, stock price and aggregate profit of the company or a strategy business
unit do not solve the problems of managers.
 It's easy for companies to store and process huge volumes of customer transaction data
with the help of information technologies.
TASK 2
1) Types of market segmentation strategies applied to a customer base:
Market segmentation is the oldest marketing trick applied in a business. Market
segmentation has become more critical now-a-days as customer population preferences has
become more specific and wider and more competitive options are available in the market
(Nagaoka, H. and et.al. 2016). Company is launching new products and ideas keeping in mind,
customer’s needs and according to market segmentation. There are basically four types of market

segmentation- demographic, behavioral, psycho-graphic and geographic segmentation and each
type vary in terms of functionality as discussed below:
 Demographic Segmentation: It is the simplest and widest type of segmentation which is
used in the market by company. This segment generally divides the population according
to variables such as, gender, age, income, occupation, family size, religion, nationality,
etc. It is even more effective and efficient if applied to different or multiple segments at
once. This will help company in maximizing their profitability.
 Psychographic Segmentation: It is that segment which divides the market into lifestyle of
people, activities, values, social class, and personality. It also takes into consideration the
aspects of consumer buying behavior. This segmentation is difficult to apply. To apply
this strategy, marketers needs to know its current and past customers.
 Behavioral Segmentation: This segment divides the population on the basis of- usage,
loyalties, awareness, occasions, knowledge, liking, and purchase patterns of customers. It
can be used in variety of ways and make marketers to produce better services for the
customers (Verhoef, P.C. and Lemon, K.N. 2015).
 Geographic Segmentation: This type of segmentation, divides the population on the basis
of geography. This can be differentiated into a country or a region, one street of homes in
a town. It is useful for both small and large business Geographic segmentation is
extremely easy to implement by company.
2) Evaluating B2C and B2B decisions making models for customer value creation:
For the growth of business, value proposition is one of the most important contributions
which a marketer made in the company. These compels the customers to choose company's
offering over competitors one. Strong value propositions are important for both type of business;
B2C and B2B.
 Business-to-Consumer (B2C): B2C refers to the business which is directly between the
company and consumers. In most consumer business the target consumer is either an
individual or a household. Customer value creation is a combination of both functional
benefit for example, cleaning efficacy, time-saving and emotional benefit for example
home pride, peace of mind. The main aim is to deliver functional product or service
(Weinstein, A. and Pohlman, R.A. 2015). There are some key elements which comes into
B2C marketing like-

1. Brand identification- Consumers loyal to the company will always have a favorable
opinion for that brand.
2. Emotional Impact- As they are directly linked with customers, it has more demand in
creating entertainment value and connecting with people’s emotions.
3. Enhance Value- One way through company can enhance their customer value is by
recommending additional items into the market.
 Business-to-Business (B2B): This type exists between businesses for example
manufacturer and wholesaler, or a wholesaler and a retailer. The overall value of B2B
market is subsequently higher as compared to B2C market. This type has a complex
value chain as it involves partners (Kleiner, G. 2016). Key elements which influences the
B2B market is-
1. Building Brand Identity- In this section, the B2B marketers need to build a brand identity
in the market by different marketing campaign.
2. Establishing Value- They need establish a strong customer value to retain gain from
them. This is most important for company to survive.
3. Develop Trust- Developing trust in customers mind will give a positive impact.
To create value propositions in any kind of business, B2C or B2B, it takes efforts and skill. From
both these market, company can learn a lot about how they can appeal their value proposition in
the market.
3) Evaluating various segmentation models in B2C or B2B for customer value creation:
Customer segmentation is important for any business as it helps them to draw an accurate
picture of the customer. Depending upon the products and services, it becomes easy to segment
consumers. Some most common segmentation methods applied by B2B market is as following:
 Firmographic Segmentation: It is the method of segmenting customers based on their
qualities. There are different factors like business size (either by the number of
employees or annual revenue), company location, industry, and even other technologies
used by the targeted companies. This segmentation is inexpensive (Kleiner, G. 2016).
 Teiring Segmentation: It is based on how the consumer is matching the objectives of the
business. It is a forward-think approach because in this customer's potential to bring
value is calculating. It allows dividing existing customers based on their customer
lifetime value.

 Need-based Segmentation: This segmentation is based on the customers needs. Out of all
the above segmentation method, it gives the most accurate way to target customer
segments.
 Value Based segmentation: This type of segmentation involves customers based on
economic value they are presenting to company in both, completed sales and potential
sales.
Business-to-Consumers (B2C) segmentation is divided into four different parts, for example,
 Demographic segmentation: Customers are differentiated on the basis of age, gender,
education, religion, occupation, income and marital status.
 Geographic segmentation: This is generally based on the geographic location of the
customers. It offers the company to deliver its services and products to the customers
where they are located.
 Behavioral segmentation: This segmentation divides the customers according to their
behavior such as loyalty, awareness, knowledge, and purchasing patterns (Di Benedetto,
C.A. and Kim, K.H. 2016).
 Psychographic segmentation: This segment the customers on the basis of their
personality, lifestyle, values and social class.
Segmentation is the first step in marketing. To apply segmentation in the market proper study is
important in order to increase customer value creation.
TASK 3
1) Analysing different techniques and methods to increase customer relationships and customer
loyalty:
Customer Relationship Management (CRM) is a processes and technology that seeks to
understand company's customers. It's a technique to manage relationships by focusing on
customer retention and relationship development. Building customer loyalty will give company a
high return. Loyal customers will buy regularly. They will also recommend to others as well.
There are different techniques increase customer relationships and customer loyalty, such as,
 Making customer service a priority: Making customer care is the key part of the business.
Organizing business on the needs of customers should be a priority. Customer-facing

employees should have all the information they need to serve their customers. They
should always try to provide high levels of service.
 Essentials of customer care: Company should try to save the customers inconvenience
every time they but something. They should concentrate on providing quality services.
Communicate effectively with the customers.
 Encouraging customers feedback: Give customers opportunities for the feedback, so that
company can improve its management. Encourage customers with a concern to contact
you.
 Customers Communication: Communication is the best way for any business to establish
their name in the market. Regular interaction helps to build trust and loyalty.
Communication with their customer will help them to build new ideas. Focus should be
done on their needs and interests (Di Benedetto, C.A. and Kim, K.H. 2016).
 Customer's Loyalty Scheme: A successful loyalty scheme encourages more frequent
purchases.
 Employees and customers service: Sales people should be trained to listen to the
customer, because they have regular contacts with customers. Encouraging staff to work
together to meet the customer needs should be first objective of the management of
company.
 Customer Relationship Technology:
2) Evaluating appropriateness of techniques and methods applied at different stages of the
consumer decision making process and CLV:
Consumers decision making is a process through which the customers ha right to select
the most appropriate product out of the several alternative options given to them. Foe evaluating
appropriateness of consumer decision making processes, it consists of several steps to solve the
problem or satisfy the need of the customers. They are as follows,
 Need or Problem Recognition: This is the first step in the process. A purchase process
starts with the need of that product within a customer's mind. The customer believes that
he has to buy something and motivates him to look for that product to solve the product.
 Information: Once the need is done by the consumer, he is most likely to search
information related to that product before making a decision (Kleiner, G. 2016). He will
use his personal source to gather as much information of that product before buying it.

 Selection and Trial: After gathering information, consumer will compare and evaluate
that information. He can buy different products in small quantities on trial basis to make
an opinion towards the product.
 Purchase Decision: Once the information evaluation process is done, it will make
purchasing decision. It is considered to be the most important stage as he will make
decision of final purchase since he has already reviewed all the alternatives before
(Nagaoka, H. and et.al. 2016).
 Post-Purchase Decision: This is the final stage of decision making. As it will directly
affect the future decision making processes by the consumer for the same product, so it is
the most crucial step.
These are some points which the company should keep in mind in order to evaluating consumer
decision making process and CLV.
Illustration 1: Consumer Decision Making Process
Source. Consumer Decision Making Process, 2014

3) Evidence of critical evaluation and synthesis of key concepts of customer lifetime value
management:
From the concept of customer lifetime value management, many positive and negative
aspects can be evaluated. Calculate the appropriateness of the cost of acquisition, it is generally
used. Some positive aspects of customer lifetime value can be summarized as, it can be used as
an asset for the company. Helps to monitor the impact of management strategies and marketing
investments on the value of customer assets (Kleiner, G. 2016). It helps to determine the optimal
level of investments in marketing and sales activities of the organization. Instead of investing in
the short term, it encourages the marketers to focus on the long-term value of customers. With
this system, company can measure the loyalty of their customers. Apart from positive aspects,
there is some negative points also of customer value management, such as, it can create
segmentation inaccuracy.
CONCLUSION
From the above report, it has been concluded that Customer Value Management or CVM,
plays an important role in the customer lifetime value. This research also unable to understand
that customers offer more than their financial value. Further more this reports helps to evaluate
different types of market segmentation strategies in B2C or B2B market which the organization
can apply. Also, evaluated the positive and negative aspects of Customer lifetime value
approach.

REFERENCES
Books and Journals
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Kleiner, G., 2016. 5 Salesforce confidence and proficiency—The chief cornerstone of effective
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Business Markets from the Perspective of Both Buyers and Sellers. p.49.
Kumar, V. and Reinartz, W., 2018. Customer relationship management: Concept, strategy, and
tools. Springer.
Nagaoka, H. and et.al. 2016. Development of Methods for Visualizing Customer Value in Terms
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Weinstein, A. and Pohlman, R.A., 2015. Customer value: a new paradigm for marketing
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<https://visual.ly/community/infographic/business/five-essential-stages-consumer-
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