Customer Lifetime Value - Homebase

TASK 1

P1 Various components to determine and calculate customer's lifetime value

Management construct relations with clients which help companies to enhance market position and generate adequate profit from business. It is essential that superior have adequate funds, material and manpower which help firm deliver appropriate items and services in market. Administration even need to implement adequate tools and techniques in system which help them to provide things in according to needs and wants of people (Hollensen, S., 2015). Along this, training and development programs that is sessions, meeting and conferences are executed by superiors to enhance skills and abilities of members; thereby make them perform activities effectively. This benefits Homebase to enhance market position and reputation by providing quality products to consumers. This advantage firm to satisfy buyers and construct customer loyal towards firm. Thus, these are various elements that are considered by management to build consumer's value for lifetime are defined beneath:

Cohort analysis: It is one of element which determine that administration require to have appropriate information about needs and wants of people. They need to acknowledge group of individuals which have similar characteristics, features and traits. This help manager of Homebase to have complete data about various market situations and their influence on customer lifetime value. Hence, it is necessary that company develop and maintain good relationship with clients by providing them quality things and in respect to their demands.

Personalised CLV: This tactic define that management use various mathematical formulas and expressions to have information about customer lifetime value. Homebase which is retail firm require to implement adequate tools and techniques in system which benefit superiors deliver items and services in according to demands and requirements of people.

Present Value: This component determine that administration require to have accurate and complete information about buyers point of view in respect to items and services. It is essential that firms acknowledge discounted value and present cash flows that are ascertained by Homebase from customers. This help company to acquire data about time value of money which help management to retain clients for longer period.

Customer Loyalty: It is another element which determine customer lifetime value benefits on organisation. Management responsibility is to use adequate tools and techniques in system which help them to deliver quality items and services to people. Homebase have buyers which are loyal towards firm which advantage executive to enhance market image and reputation (Kerzner and Kerzner, 2017) This also helps company to position higher than rivals by establishing competitive advantage.

Customer service: This is component which define that after sales service is provided by Homebase to satisfy people. This benefits company to enhance market position and construct consumers loyal towards firm.

Sales promotion: Coupons, rebate, discounts, offers are various tools that are provided by management of Homebase to retain customers for longer time and give them alternative to visit store again and again.

Mathematical formula: Administration require to use appropriate quantitative tools to get appropriate information about customer's life time value. It is necessary that adequate numerical formulas and mathematical expressions are used by manager of Homebase. This help them to have complete information about profitability of firm; thereby make adequate decisions and select alternatives which are beneficial for company. Firm has finance department whose duties is to record expenses and income to acknowledge amount of funds available in respect to organise business operations effectively. For example, Company have 200 customers which help management to generate 20000 Pound as profit. Customer lifetime value is calculated by formula which is dividing total number of consumers by total revenue that is 200/20000 which is equal to 0.002. This helps seniors to acknowledge customer's satisfaction and and profitability of firm. Thus, management make adequate decisions and conduct business operations effectively. CLV mathematical formula is defined below:

CLV = ((T x AOV)AGM)ALT

(AOV: Average Order Value; T = Average Every month transaction; ALT = Average clients Life duration)

(

R:Monthly Retention Rate; D: Monthly Discount Rate

P2 Benefits of customer lifetime value to an organisation

CLV is appropriate concept which is used by management to use adequate methods, tools and techniques that are used by firms to deliver appropriate items and services in market. It is necessary that quality things are provided to buyers which help Homebase to enhance reputation of company. Along this, administration even require to have effective and strong customer base which benefits enterprise to generate adequate amount of revenue from business.

Therefore, these are various advantages that CLV have on improving system functionality are defined below:

Financial growth: This is main characteristic and benefit of customer lifetime value concept application have on improving revenue of organisation. Executive responsibility is to implement adequacy tools and techniques in system which help them to use material and manpower in efficient manner (Kim and et. al., 2015). Homebase is a retail store which provide kitchen items, paint and décor, bathrooms and gardening products. This benefit company to have large customer base which help management generate adequate profit from business. Thus, firm have adequate amount of capital to conduct business activities in according to market conditions.

Increasing reputation of company in market: Executive responsibility is to use appropriate technologies and techniques which help superiors deliver creative and innovative things to people. Customers requirement is to get products in respect to their demands and quality things. This benefits Homebase to attract people by enhancing reputation and image of firm in market. Along this, manager is also able to establish competitive advantage which help them to position company higher than rival brands; thereby increase revenue capabilities.