What Is Customer Lifetime Value? Essay

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

After profitability and lifetime values are determined, these measures are included for determining customer decisions for -

Today’s world competition is very strong in every kind of businesses. Every organisations must provide high quality products or services in order to survive, however their competitors also providing the same or comparable products or services. An important way to an organisation to get an edge over its competitors is to provide extra service to satisfy and delight their customers, which can retain them and also gain new customers. Therefore the achievement of customer satisfaction must be a major objective in all organisations.

During 2010, management revised its estimate of the customer list economic life, and began assigning an amortization period of 15 years to newly acquired national customer lists. Amortization expense for the year ended December 31, 2010, was $3 million. To test the economic lives of the customer lists, the engagement team asked management what the reasoning was for the change in the assumed economic life this year. Management provided a memorandum that discussed the rationale for using the 25-year economic life to amortize the various customer lists, as well as the rationale for the current-year change in management’s estimate of the newly acquired national customer lists lives.

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.

Before i go further let me touch on a brief introduction on customer value, customer value can be defined as the difference between what a customer gets from a product and what he or

Every company wants to make money and bring in customers, but what about making loyal customers out of them so they continue to come back? How do you even bring in potential new customers and turn them into loyal customers to begin with? The lifetime value of a customer is a predicted value of net profit credited to the total future relationship of a customer. We want to know the financial value of each customer so that we know how much to spend in marketing when looking for new customers and the potential of profits back from the money in advertising spent. The grocery store chain must start looking at customers and how to make them happy and loyal in the long run, as opposed to how to boost sales right now. From the Marketing Management book, a well-known rule states that 80 percent or more of a firm’s profits come from the top 20 percent of its customers. Thus, we want to focus on brining in new customers with successful marketing and turning them into loyal returning customers.

Then the report describes the theoretical aspects of the study in the literature review. This section mainly consists of brief description about different important topics about customer value marketing.

Gaining feedback from consumers is also important because updating consumers about their opinions and revising the changes in plan can be considered. The change for the organisation is not always found to be good for the consumers.

Zeithaml (1988, as cited in Smith & Colgate, 2007, p. 8) defined customer value as

Customers enable the organization to treat each customer in a different way on the basis of the contribution they make towards the firm (Kleinaltenkamp & Wengler, 2007). The analysis of customer lifetime value aids the organization to rank and order customers on the basis of their contribution to organization’s revenues. It also helps the organization to determine as to how much it can invest in retaining customers to gain positive returns on the investment.

To compete now a day’s competitive environment companies have to take a look on customer satisfaction as a high priority because they now a days demands improved products in quality, cost and reliability. And these are the key factors on which the organization must focus on and to consider those key factors, organizations must adopt new approaches of management to gain the satisfaction of customer. We can examine every item in the figure shown below.

Variation in customer demand means that a company can’t force their customers to buy exactly what they want them to buy. Sam claims that forecasting customer demand is the biggest challenge that a company faces under operation. He says this is the biggest problem because companies forecast demand at the wrong level of the bill of material. In the article, Sam claims that companies often rely on forecasting. This could cause a major problem within the company when the forecasting is wrong.

It is imperative to satisfy customers and give them an amazing experience at the company. While it cost less to sell to existing customers and companies can increase profit by selling to the same customers; if customers are satisfied, there is more chance they will come back for more services or products. Satisfied customers are a free marketing for the company. However, it is the opposite if customers are dissatisfied. Dissatisfied customer will tell 8 to 10 people about his or her experience (O’Brien, A & Marakas, G. 2004). If by any reason, representatives see that the customer is not satisfy, they should act fast and fix the problem. Furthermore, there is more chance for sale representatives to sell to an existing customer that to a new customer. A good strategy for customer retention is to reward good customers. Companies can easily do

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).