Customer Value Maximization: How it Can Help Your Business Flourish

customer value maximization

Customer attraction and, subsequently, customer retention are two factors that every business must consider to maintain a healthy and long-lasting relationship with its customers. In today’s climate, marketers apply numerous techniques and strategies to reel customers in and keep them engaged. This is the crux of the matter that Customer Value Maximization has been devised to deal with.

Customer Value Maximization is a set of techniques used by marketers to personalize the marketing geared towards consumers and personalize the whole customer experience from browsing to purchasing to customer service. The aim of using CVM is to maximize revenue generation by increasing the frequency of order placement per customer, as well as the monetary amount of the purchase(s). CVM also seeks to increase customer retention rates and transform all purchasing customers into active consumers of the business.

Steps to Achieving Customer Value Maximization

There are a few factors that affect a company’s likelihood of achieving CVM. Ideally, a business would want to market and sell products and services to customers prone to avail the offer at prices that are competitive in the market while also providing adequate customer service once the transaction is done. With the internet at our disposal and the ability to study data, we can further perfect the formula to understand when and where to apply certain strategies.

Market Segmentation

Also called Customer Segmentation, Market Segmentation is a method of splitting the customers into smaller groups where we can then study their purchasing behaviors and tendencies. This aids marketers in understanding what certain segments want in comparison to others. Using customer segmentation, we can now target specific promotions and adverts of certain products to the related customer segments that we now will favor the product over other segments. In this way, a business can maximize its revenue generation and see a higher conversion rate of potential customers.

Moreover, it is also well-established that consumers are more willing to purchase products or services from a business that personalizes the suggestions and recommendations. This is better for the customer and increases their value as they are not suggested products irrelevant to them.

To add to this, customer segmentation is a better alternative to marketing certain products based on assumptions of a geographical area or age range. Customer segmentation works on a much more detailed and individual level, giving every customer a personalized experience.

Dynamic Segmentation

Taking customer segmentation one step further, we get dynamic segmentation. This is a powerful marketing tool used to maximize customer value by tracking customer activity over time. This means the business can accurately monitor what segments a certain customer is coming from and what segments they may enter into. This enhances the already personalized customer experience designed using customer segmentation. It considers the segments a customer has been a part of in the past and the segments they may be a part of in the future. A business can, thus, personalize customer experience even more such that the surrounding segments are also taken into account.

Customer Lifetime Value

Customer Lifetime Value (CLV) calculations should be used to aid the modeling of CVM. CLV is an accurate estimate, made using advanced calculation techniques, of the long-term revenue a customer can bring into a company. The point of using CLV to examine and model CVM is to look at the bigger picture rather than just considering short-term revenue from customers.

Accurate Prediction of Customer Behavior

While CVM is great at studying past behaviors and transactions of customers to mold a consumer-personalized experience, it is also wise to invest in techniques that make calculated predictions about future consumer behavior so that the business can get ahead of the curve.

Customer Value Management

Customer Value Management is a part of relationship marketing and can be related to the modeling of customer value maximization. Customer Value Management is a tool used by businesses to measure how well they are doing compared to their competition in terms of the trust between customer and business and the value created for the customer.

This technique aids businesses in

  • Studying the market and creating a target audience
  • Understanding what value customers want from industry firms
  • Identifying changes that can be made to improve customer perceptions
  • Creating a healthy and constant flow of information relevant to the processes taking place to keep the business and all of its components aligned in the same direction

Customer Value Optimization

Customer Value Optimization is a process that works based on the same methodology as Customer Value Maximization and Customer Value Management. CVO seeks to optimize the customer lifecycle with the company to improve the user experience and elongate the time of the customer with the company to maximize returns on the investments made on marketing.

CVO improves on the e-commerce growth formula i.e.

G = T x CR x AOV


G = Growth

T = Traffic

CR = Conversion Rate

AOV = Average Order Value