Unit 4_MT434_Discussion response

13623Respond or elaborate on the response below:

One of the most underrated strategic efforts that many companies have overlooked is retention of consumers. Many companies will plan their strategic marketing objects around gaining new customers to temporally increase their market share. However, it can be more advantageous to implement strategies that focus on customer retention. The idea is that customers that remain loyal are more likely to improve that organization’s profitability overtime due to not needing to be convinced to purchase goods and services from the company (Christopher, 2023). This concept is known as lifetime value of customer and is calculated as:

Lifetime Value = (Average Transaction Value) (Yearly Frequency) (Customer Life Expectancy)

Moreover, loyal customer satisfied with the quality of goods and services are more likely to recommend them to people close to them. Furthermore, this word to mouth marketing approach will cost the organization nothing in terms of marketing their goods and services. As a result, organizations that focus their strategic efforts towards customer retention, then they will be able to enhance their life-time value of customer by keep customers make frequent purchases, do so for years, and steer other customers to the organization.

Applying customer lifetime value in a real-world scenario similar to big box stores.

Assumptions:

average transaction value: $300 a bi-weekly + $95 (yearly fee)

average frequency: 24 weeks

customer life expectancy: 1 years

CVL = 95+ (300) (24) (1) = $7295

Whether this formula and the metric resulting from it is ethical is dependent on how the users implement the insight. Ethical uses of the information could allow for allocation of resources to improve customer experience or build better long-term relationship. On the other hand, the information can lead to discriminatory targeting and privacy violations or aggressive upselling.