Database Reference
In-Depth Information
The Customer Lifetime Value (LTV) is easier to predict if it incorporates recurring number
of the corresponding product's use cycle(s). For instance, if the average use cycle of a vehicle cost-
ing $20,000 is 5 years, the CV for a single vehicle-owning customer with the relevant
customer
lifetime
of about 40 years may range between $140,000 and $200,000. The LTV of this customer
will be much larger because of additional values representing warranty, maintenance, repair, and
other services during the use cycle of a vehicle.
This is based on the powerful idea of the
business cycles
or the constituent product
use cycles
. A database of the ownership and use history of product(s) can be used to
perform sales projection, at any moment of time, for a specific period for a named
prospective customer. It is possible to predict the requirements of a company with
a reasonable accuracy based on
◾
The average use life cycle of a product
◾
The average innovation cycle of the underlying technology
◾
The business cycle of the particular company as well as the concerned industry
◾
The purchase history of company for the relevant product
This kind of information on enterprises used strategically for sales and marketing could help
in improving
◾
Efficiency of the sales by reducing the time to sell
◾
Effectiveness of the sales by entering the natural procurement cycle at an appropriate
time as predicted by this analysis
1.2.7 Customer Value Management (CVM)
In the process of reorienting the business around the customer, companies are increasingly real-
izing that not all customers are equal. Different customers provide different revenues to the com-
panies, they choose its products and services for different reasons, and, finally, they also defect
for different reasons. This range of customer behavior results in widely differing values across the
customer base, in terms of customers' future revenue to the business. To maximize profitability, it
is important for companies to determine the future value of prospects and customers, so that they
can differentiate their marketing activity and business processes to optimize future revenues and
return on investment.
Customer Value Management (CVM) is the management of processes and communications
designed to maximize Customer Lifetime Value (LTV) by closing the gap between the current and
potential Customer Value (CV). CVM provides a way of measuring and improving the value deliv-
ered by the customer to the business and using this as the basis for decision making. It identifies those
customers that really count: identifying what it is that they want as individuals (or as groups) and
determining how to deliver it profitably.
CVM improves profitability and delivers greater Return on Investment (ROI) by assisting in
the following:
◾
Target acquisition efforts and activities at those prospects with the greatest CV.
◾
Develop stronger and more profitable relationships with existing customers.
