The most important part of an organization’s growth and success is its customers. A loyal customer of an organization is the one who cost less to serve, usually pays more than what other customers do and entice more customers through their personal account i.e. word of mouth. If you also agree to these three claims, then it is the right time to revisit them thus finding about them being true. This research reveals that loyal customers have experienced their worth to the organization and look for premium services. They also feel that services given to them should be cost effective and they would only do positive publicity if they feel that organization has been loyal to them.
Here in this article we will be discussing about why companies chivy the claims mentioned above and also what is the logic behind it? There is a simple answer to this. In short words loyalty equals profitability. It is a general phenomenon that if you are loyal to somebody then he or she should be loyal to you. In the similar way when company wants customers to be loyal with them, then they have to do the same with its customers. Keeping this phenomenon in mind an organization maximizes its backward looking metrics like:
1. Share of wallet (SOW)
2. Past customer value (PCV)
3. Recency, Frequency and monetary value of Purchases (RFM)
However it is not important the loyal customer management would lead you to profits. Loyalty and profitability link can be advocated simultaneously. It can be achieved by maximizing and measuring CLV i.e. customer life value. Using CLV exemplar helps companies in making logical decisions about customers and various presumptions to retain and acquire, and a...
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...is not limited to selling but making new customers thus increasing the sale and profits of the firm. In this way a firm can communicate with its customers very nicely. This is called interaction orientation. It helps a lot in developing a business owner form overall aspects. In short we can say that all the strategies based on CLV would be omnipotent and omnipresent worldwide.
The above mentioned information clearly reveals the importance of customer lifetime value on a business owner; in addition to this how it influences very organization and its owner. You can be sure of using such techniques for increasing customers, increasing product sale and thus increasing profits. Future profit estimation can also be done with the help of these strategies.
Link used for resourcing the data: http://www.imanet.org/docs/default-source/maq/2009maq_spring_kumar-pdf.pdf?sfvrsn=0
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