Q1: Customer Lifetime Value' and ways to implement Customer Relationship Management Customer lifetime value is a concept used in marketing to predict the net profit that a business should expect in its entire future involvement with a customer. The concept does not consider the whole life time of a customer. Instead, there is a cutoff point of approximately three years. If a business needs to do marketing plan that involves revenue consideration beyond three years, the process will require a more in depth examination than what customer lifetime value calculation can provide. The customer lifetime value calculations also do not include the previous contributions of a customer to the business’s profit. It is however probabilistic in nature and focuses on future profitability of both prospective and existing customers.
According to the Spectacle Hut case, the company has managed to build a strong customer base. It has 43 shops across Singapore. It also has presence in Beijing and Kuala Lumpur with prospects of expanding to overseas. The company has put measures to ensure that it attracts and retains its customer base. Customer lifetime value in the context of Spectacle Hut would therefore imply predicting current and future profits as it continues developing a long term relationship with its customers. Future predictions can be made over a period of three years using the existing customers as well as prospective customers. It can be noted that the company is already in the process of studying its options in establishing a presence overseas. Customer lifetime value calculations should therefore also include the potential customers in overseas market.
Ways of successful CRM implementation
Customer relationship management is an important aspect for any company that seeks to develop a strong customer base. In most cases, customer relationship management is misconceived to only involve the operations of customer service. However, it is more than just attending to customers. For the Spectacle Hut, customer relationship management can be a powerful solution for maximizing profits, improving profitability, and widening its customer base. CRM is more advantaged for the mentioned purposes than other departments in the organization because it relies on virtually anyone within the company. In most cases, it does not require one to possess special skills.
Customer relationship management as a software used for enterprise management offers a vast amount of important information that the company can use to increase prospects for business growth. The enterprise package can also analyze business processes and validate leads within the company. The company can only begin to experience the benefits associated with the package if it successfully implements it. The company needs to create a culture or a way of doing business that focuses on customer satisfaction. Internally, the work force has to be willing to share client information. Basically, the workforce has to develop a collaborative mentality where they share information to benefit the company at large. Other ways for successful implementation of CRM enterprise package is through setting of goals, obtaining the support of senior management, and analyzing the working processes.
Having built a strong customer base in Singapore, Beijing, and Kuala Lumpur, the company needs to ensure customer retention. Apart from using the CRM enterprise package, customer retention can also be achieved through other engagement. Constant communication with customers is important because the company will be able to know the ever changing needs of customers. It is through the constant interaction that the company can know what the customers want. Feedback from customers has to be part of the communication process. Staying connected with customers helps them to know that company is thinking of them. The idea of connecting with customers only when trying to sell its products can fail to build a long lasting relationship with them. Currently, with the advancement of mobile communication technology, customer communication has been simplified. It is easier to constantly sent texts to customers and be sure of receipt. Communication can also involve sending happy wishes during national holidays and other important calendar seasons such as Easter and Christmas. The frequency of communication can vary depending on the industry, but it is important that the company at least makes quarterly contacts.
Additionally, retention can also be achieved through rewarding the customer relationship management team. The company needs to come up with a way of measuring customer satisfaction and rewarding the team responsible for achieving the set goals. If the idea of retaining customers is a priority for Spectacle Hut, then the management has to demonstrate this importance to its team. Basically, customer retention has to be measured and improved.
Customer service has to be made a responsibility of every employee in each of the company’s retail outlets. Since there is a shortage of optometrists in Singapore to provide quality services to customers, the company can begin its own training programs for the existing semi skilled staff members. The training program should aim at inculcating basic and necessary skills for attending to customers. This program can run as the company continues its normal operations. At the same time, the company will be able to save on cost.
References
Anderson, E., Fornell, C. & Mazvancheryl, S., 2004. Customer Satisfaction and shareholder value. Journal of Marketing, pp. 172-185.
Athanassopoulos, A., 2000. Customer Satisfaction Cues to Support Market Segmentation and Explain Switching Behavior. Journal of Business Research, p. 191–207.
Cronin, J., Brandy, M. & Hult, T., 2000. Assessing the Effects of Quality, Value, and Customer Satisfaction on Consumer Behavioral Intentions in Service Environments. Journal of retainling, pp. 193-218.
Evans, G., 2002. measuring and managing customer value. Work study, pp. vol. 51, no. 3.
Hallowell, R., 1996. The Relationship of Customer Satisfaction, Customer Loyalty, and Profitability: An Empirical Study. The International Journal of Service Industry Management, pp. 27-42.
Q2: Pricing Strategies
There is a no particular method that can be considered right for pricing goods. A company has to first develop an objective for pricing and then make consideration for a number of factors surrounding it before establishing a pricing strategy for its products.
The first recommended pricing strategy for Spectacle Hut is value based pricing. This strategy involves pricing the optical care products and services based on the value they create to customers. This pricing strategy can be established by considering the value these products create to customers. For instance, if the products are able to save customers a large amount of money in a year, then the company can price its products and services considerably high. Value based pricing will give the company a bargaining power over its customers. However, this form of pricing is only recommended if the company focuses on providing customers with quality services and products. The company cannot price its products highly if customers are able to get similar value and quality of services and products from rival companies. The marketing strategy for the company needs to communicate the message of cost saving to customers. Customers can gladly pay for high priced products and services if they are able to be convinced that the value of the products and services saves on cost.
Another pricing strategy that can work for the company considering the environment in which it operates is psychological pricing. This involves considering how the consumers perceives the company prices. Spectacle Hut operates in a highly competitive environment. The optical care market is mature bearing in mind the fact that 80 percent of Singaporeans above the age of 18 are short sighted. As a result, there are many companies providing optical care. It would therefore be recommended for the company to consider consumer perceptions of its prices. One strategy is positioning where the company becomes a low cost leader in the market. Pricing lower than competition has the potential to attract and retain customers especially if the products and services are of high quality. However, being a cost leader requires the company to work on its internal operations and reduce cost of production. The company cannot reduce the price of its products and services if production cost and fixed cost remain high. Therefore, in order to price lower than competition, internal efficiency is imperative.
For instance, according to the case, Spectacle Hut received a grant in 2008, which it used to upgrade its internal efficiency. Through the grant, the company managed to improve its productivity by reducing human errors and improving systematic work. The company also automated operations in its sales systems implying elimination of manual record checking and counting. Using the grant, the company also managed to implement a system of tracking staff punctuality and attendance hence improving employee productivity. All these enhancements of internal operations can translate to reduced production cost and fixed cost. In effect, the company can afford to price its products and services lower than rival companies.
Another strategy for psychological pricing is popular price points where the company considers a specific price at which customers are more willing to purchase the spectacles and other optical care products and services. The strategies should be used if the company targets to increase sales amidst a reduced margin.
References
Gregson, A., 2008. Pricing Strategies for Small Business. 2nd ed. New York: Self Counsel Press.
Kotler, P. & Armstrong, G., 2010. Principles of Marketing. 13th ed. New York: Pearson Prentice Hall.
