Customer Lifetime Value

If the existing customers were to be economically valued, as an asset of the company, how much would they be worth?

Customer Value is ‘the performance characteristics, features and attributes, and any other aspects of goods and which customers are willing to give up resources’ (Robbins, Bergman, Stagg and Coulter, 2012). This broad definition highlights the fact that there are multiple aspects that contribute to create a sense of value within the customer.

Retention is a reflection of a customer’s willingness to remain with a particular company’s service or products and is useful to measure customer loyalty. The relationship

The expected customer lifetime value (CLV) for a newly acquired Retail Relay customer varied according to the study conducted. In the pilot study, the CLV was $24.21 while the full study revealed a CLV of $11.44. As the pilot study was more comprehensive in regards to customer buying trends, a good approximation of CLV would be near the $20 mark.

Hannen (2001: cited in Reading Pack) said that keeping existing customers is cheaper than finding the new ones. However, the retailing industry is a ‘generic market’ and a lot of effort is needed to build meaningful relationships with the consumers.

Cost-volume-profit (CVP) analysis is the study of the effects of changes in cost and volume on a company’s profits.”(Kimmel, Weyandt & Kieso, 2003, p.263)

Explaining how each customer has a lifetime value and how custom features optimize sales and customer loyalty

CUSTOMER LOYALTY DRIVES PROFITABILITY AND GROWTH: To maximize profit, managers have pursued the Holy Grail of becoming number-one or -two in their industries for nearly two decades. Recently, however, new measures of service industries like software and banking suggest that customer loyalty is a more important determinant of profit (see Frederick F. Reichheld and W. Earl Sasser, Jr., “Zero Defections: Quality Comes to Services,” HBR September–October 1990). Reichheld and Sasser estimate that a 5% increase in customer loyalty can produce profit increases from 25% to 85%. They conclude that quality of market share, measured in terms of customer loyalty, deserves as much attention as quantity of share.

Generally speaking, CLV and customer retention is always important to some degree, some more so than others. An example of when CLV may not be as beneficial is within my own personal line of work. I work for a construction general contractor and while maintaining good customer relations is important, it is more important for other reasons other than maintain constant revenue from that client. In my line of work, many customers/clients do not return, and if they do, the project is not of the same value. The reason they do not return is because many owners/clients may only have one construction project they want to be built, and if they did have other projects, they will all vary in size which will change the overall profit that can be made from the project. In this case, calculating the CLV would not be beneficial since our product to our clients is typically a onetime deal. But, being able to maintain good customer relations throughout the project is very important since many of our future projects are based off of recommendations from past clients, or they are used as references for future projects with new clients.

CLV is a customer-centric approach that focuses on three aspects of the customer process: acquisition, retention, and development. According, to (Dinan, 2015), customer Lifetime Value (CLV) is defined as the total dollars flowing from a customer over the entire relationship with that customer. It’s a projection that estimates the customer’s financial worth to a firm. In the pharmaceutical industry where I work (CLV) begins when a patient first receives a prescription or requests a product from a physician, and continues all the way through patent expiration-and, if possible, through a product conversion. Building a compliance triangle, linking patients, physicians and pharmaceutical companies together (Dinan, 2015).

Since it is not known how long the relationship will last, it is normally considered over a 12-month period or its multiples. If a company constantly spends more money on acquiring new customers than the customer generates for the company, the company will soon go out of business. As stated by Pareto Principle, 80% of the revenue comes from 20% of the customers, thus it is highly beneficial for the company to recognize those cash cows and focus on them. Hence, it is very important, from a company’s perspective to know a customer’s lifetime value.

Net Promoter Score is becoming an increasingly popular tool used by many companies who try to assess customer loyalty. The Net Promoter Score is based from a model developed by Frederick Reichheld in the book, “The Ultimate Question” (Beyond 2). The system helps measure customer loyalty between an organization and a consumer. The Net Promoter score was designed on an 11-point scale from (0 to 10) and it separates the customers into promoters, passives and detractors (beyond 2). Promoters are people who score 9’s and 10’s on the Net Promoter Score scale. The passives are the people who are 7’s and 8’s on the Net Promoter Score scale. The detractors are the people that are from 0 to 6 on the promoter score scale. One of the main goals of

As many other big companies, losing profitable customers can dramatically affect a firm’s profits. The cost of attracting a new customer is estimated to be five times the cost of keeping a current customer happy, so Hilton was using CRM to retaining customers. As famous brand, Hilton give the best quality for their customers. Quality is the totality of features and characteristics of a product or service that bear on it’s ability to satisfy stated or implied needs. For achieving high levels of total quality so that firms remain solvent and profitable, Hilton marketers play a key role. Marketing managers must calculate customer lifetime values of their customer base to understand their profit implications. They must also determine ways to increase the value of the

Customer Lifetime Value is a metric used in marketing that represents the total net profit a company will gain from any given customer (Rouse, 2016). A company can describe a profitable customer as “a person, household, or company whose revenues over time exceed, by an acceptable amount, the company costs of attracting, selling, and servicing that customer” (Berger & Nasr, 1998). The customer’s revenue that is excess is considered to be the customer lifetime value (Berger & Nasr, 1998).

Relationship marketing in telecommunication accommodation industry makes for a consequential part because its nature is unique in this sector. It is a topic of discussion that frequency in the process of buying value in accommodation industries, for example, telecommunication sector. reports of Loyalty and Retention studies suggest that on an average, the cost to magnetize an incipient customer is more than what it takes to implement a retention strategy . Kelley, Gilbert, & Mannicom, 2003)[ 12]. Reichheld and Sasser (1990) found in their study of internet apparel market that the cost of customer acquisition is 20 to 40 percent more than preponderant than the