Customer

Lifetime
Value
Customer Lifetime Value (CLV)

- Is the forecasted sales or profits that a company can derive from the entire
span of the future relationship with a particular customer
 A customer’s lifetime value can be based upon the potential value
and profitability of their relationship with the company.
The CLV perspective has several
distinct implications:
 It considers a longer-term perspective of a company’s relationship with
customers in contrast to a short-term view of “take the customer’s money
and run
 It calculates and compares costs of acquiring new customers and keeping
old ones.
 Costs for getting new customers are called acquisition costs, whereas,
costs for maintaining existing customers are called retention costs.
 It highlights the importance of market segmentation, with the recognition
that some customer groups are more profitable than others.
CLV can be measured using the
formula:
Average value of a sale to a particular customer or customer
group
x Number of repeat purchases in a year
x Average retention time in months or years
= Customer Lifetime Value
For example, an athlete who spends 2,000 Inr for every visit to a spa and goes
to the spa twice monthly for an expected time period of five years would
have a CLV of:
 2000
x 24
x 5
= 240,000
The athlete’s Customer Inr
Lifetime
Value is 240,000 Inr
 If gross profit is used instead of sales, the results will show the total
profit that can be generated from a customer in his entire life.
By knowing the value or worth of its customers, a company can foucs
its resources in attracting and keeping “right” type of customers.
 Companies must, however, exercise care in favoring high-value over
medium-value customers.
 Innovators or early adapters are valuable CLV targets. These are
customers who are quick to buy a new product or try a new service. This is
especially true when they are also opinion leaders and are capable of
substantially influencing demand.
NEW PRODUCT DEVELOPMENT
1. Idea generation (Ideation)

The initial stage of the product development process begins by generating new product ideas.
This is the product innovation stage, where you brainstorm product concepts based on
customer needs, concept testing, and market research.
It’s a good idea to consider the following factors when initiating a new product concept:

•Target market:

•Existing products?

•Functionality

•SWOT analysis.
2. Product definition

Once you’ve completed the business case and discussed your target market and product
functionality, it’s time to define the product.
This is also referred to as scoping or concept development, and focuses on
refining the product strategy.
During this stage, it’s important to define specifics including:

•Business analysis

•Value proposition

•Success metrics

•Marketing strategy
3. Prototyping

During the prototyping stage, your team will intensively research and document the product by
creating a more detailed business plan and constructing the product.
These early-stage prototypes might be as simple as a drawing or a more complex computer
render of the initial design. These prototypes help you identify areas of risk before you create
the product.

During the prototyping phase, you will work on specifics like:

•Feasibility analysis

•Market risk research

•Development strategy
4. Initial design

During the initial design phase, project stakeholders work together to produce a mockup of the
product based on the MVP prototype. The design should be created with the target audience in
mind and complement the key functions of your product.
A successful product design may take several iterations to get just right, and may involve
communicating with distributors in order to source necessary materials.

•Source materials

•Connect with stakeholders

•Receive initial feedback

5. Validation and testing

To go live with a new product, you first need to validate and test it. This ensures that every part
of the product—from development to marketing—is working effectively before it’s released to
the public.

•Concept development and testing

•Front-end testing

•Test marketing
6. Commercialization

It involves launching of the product and implementing it in a website.

By now, you’ve finalized the design and quality tested your development and marketing
strategy. You should feel confident in your final iteration and be ready to produce your final
product.

•Product development

•Ecommerce implementation