How to Increase Customer Lifetime Value

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The ultimate goal of all marketing activity is to facilitate mutually satisfying exchange between parties. The activities include design, pricing, promotion, and sharing of ideas, supplies, and services. The role of marketing and nature of marketing actions inside an organization are powerfully influenced and guided by the organizations philosophy and orientation.

There are six philosophies namely Product Concept, Production Concept, Marketing Concept, Selling Concept, Societal Marketing Concept, and Customer Concept. Under these philosophies, companies carry out marketing activities.

The Production, product and selling concepts of doing business are no longer considered relevant (with exceptions of course), as they fail to focus on customer needs. Companies that do not define their businesses in terms of customer needs suffer from Marketing Myopia and may end up losing their markets forever.

The marketing concept of business is the most relevant philosophy today. This philosophy rests on five key pillars of identifying target market, understanding customer needs, creating products to satisfy those needs, integrated marketing to deliver products and services and that long-term profitability can only be earned through customer satisfaction.

The customer concept and societal marketing concept are refinements of the marketing concept of doing business. These concepts recognize the importance of customer lifetime value and that organizations should be responsible and good citizens of the countries they operate in.

Customer Loyalty is a key issue in most organizations. Companies must balance new customer acquisition with customer retention. Customer Loyalty can only be created by consistently delivering value to the customer in excess of his expectations.

How can companies increase value to the customer?

The most obvious answer that comes to mind is to reduce prices. Whilst this is certainly a very compelling way of creating value, it is often not sustainable, most easily imitated and has a very short-term effect. There are several sources of value to a customer, price being only one of them. Companies must look at the several ways in which it can create and consistently deliver long term sustainable value to its customers as well as which are profitable for the organizations as well. The different sources of value could be:

•    Quality Improvements
•    Add attributes or Features that enhance Performance
•    Observe how customers actually use the product
•    Identify Customers perceptions of risk
•    Reduce risk of product failure

 

 

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