Consumer lifetime value

Chapter two addresses Customer Lifetime Value (CLV). Here’s the scenario: I am the owner of a bath and beauty products shop in which I make natural products and sell them. These products are “consumables” meaning that people consume on a regular basis and look for a repeat purchase of the same product (either at my store or if unsatisfied at a competitor’s store). It’s September and past sales data shows a large slump in customer count and sales mostly attributable to tourist season decline and disposable income spent by consumers on back-to-school products leaving little disposable income left. As the owner and marketer, why would I offer a professional coupon to my existing customer data base and direct mail it on Sept. 13 for expiration on Sept. 30? Put consumer behavior to work. Why would I do that? How does it relate to Customer Lifetime Value, and am I losing money in the long run? Let’s say there is a 500% mark-up (so in essence it’s costing me $1 in actual money, and customers have to purchase something over $5 to redeem it). Also keep in mind as you answer that it is a consumable product, CLV plays a role, and it’s a product that people like to smell and sample.

Sample Solution

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