What Is Customer Lifetime Value?.. Many Companies Use Customer

1284 WordsApr 11, 20176 Pages
What is Customer Lifetime Value? Many companies use Customer Lifetime Value (CLV) as a way of “segmenting [their] customer base” (Gallo, 2014, para 4). You may ask why a company would want to segment their customer base, and the reason is that this allows a company to better service them. CLV, in short, allows a company to determine how much profit they can generate from a customer over the lifespan of that customer (Gallo,2014). Different customers will generate different amounts of profit for a company, which is why segmenting or grouping customer bases together is convenient. Once these customer groups have been identified, a company can then “identify specific past behavior variables that affect the future purchase pattern of the…show more content…
This information gives the company some direction for marketing and sales tactics and how much to invest in each. Describe a situation where CLV and customer retention will not be important. 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. Define and describe Database Marketing and CRM. What are the pros and cons of Database Marketing and CRM? Provide an example
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