Define lifetime customer value. a) Explain the various components used to calcul

Question

Define lifetime customer value.

a) Explain the various components used to calculate LCV. (3pts)

b) How may marketing managers use LCV in various strategies to grow marketing profits? Bullet points with explanations of each will be helpful. (3pts)

c) Your company, Bubba International, is evaluating four different market segments. The company is going to select one segment as its primary segment for the next three years.   Using the excel program on lifetime value, what is the Total lifetime value of each of the following customer segments using a 5% discount rate. Show the value of each segment. If the company only has the resources to keep one segment, which segments should the company keep? Why? Include a table or graph showing a comparison of each segment. Your written explanation will be one page or less. (4 pts)

i) Segment A has a 90% satisfaction rate, the sales force spends 200 Kuna each year calling on them, with an average margin of 50% on a sales of 1000 Kuna. The marketing department has an integrated marketing communication strategy that costs 300 Kuna to attract new customers. There are 1000 of these clients in this segment.

ii) Segment B has a 95% satisfaction rate, the sales force spends 400 Kuna each year calling on them, with an average margin of 40% on a sales of 1000 Kuna. The marketing department has an integrated marketing communication strategy that costs 900 Kuna to attract new customers. There are 500 of these clients in this segment.

iii) Segment C has a 65% satisfaction rate, the sales force spends 25 Kuna each year calling on them, with an average margin of 80% on a sales of 1000 Kuna. The marketing department has an integrated marketing communication strategy that costs 30 Kuna to attract new customers. There are 3000 of these clients in this segment.

iv) Segment D has a 80% satisfaction rate, the sales force spends 200 Kuna each year calling on them, with an average margin of 60% on a sales of 1000 Kuna. The marketing department has an integrated marketing communication strategy that costs 300 Kuna to attract new customers. There are1500 of these clients in this segment.

Explanation / Answer

Answer:

Lifetime Customer Value: In marketing, the meaning of the concept of Lifetime customer value means the prediction of net profit from the customer for the life time engagement. Thus this is the prediction method which predicts the new profit from lifetime customers for the life time engagement duration.

A. The components for the LCV are as below: Following are the key components which impacts the CLV predictions are as below

B. Marketing managers use LCV for in strategies to grow marketing profits are as below

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