Question

Use the CLV concept to explain the typical pricing approach used by major carriers.

Answer 1

CLV means customer lifetime value which means the net profit you can expect from a given purchases over the entire life of the customer realtionship. It means the prediction of all the value a business will derive from their entire relationship with a customer beacuse we dont know how long each relationship will be, so CLV is stated as periodic value . CLV is an efficient strategy in business growth. It helps the firm's to understand better of what you can spend to acquire customer.

There can be different pricing startegies to sell a product or service. The price can be set to maximize profitablitiy for each unit sold or the overall market. The firm's decision on the price of the product impacts the customer decision on whether or not to purchase the product. When firm take any decision on pricing strategy then they should be aware of everything so that they can make an appropriate decision .

In the end, customer decides whether a product's price is right. Therefore, from marketing perspective pricing decision should start with customer value. When a customer buys a product so he gives price to get some value in return . Therefore, effective pricing should focus on the value the product provides for the customer.

The company should first identify the customers needs and value perceptions then they should set a target price completely based on customers perceptions of value. Then the company should focus on the target cost that that they will inccur and what will be the resulting product design.

There are 2 strategies one is good value pricing and another one is value added pricing . Good value pricing means offering right combination of quality and good service ar fair price that means fair in terms of price and customer value. Value added pricing means more features that is making the product more differentiated and charging higher.

CLV helps in understanding how much the firm can comfortably spend on marketing and sales for customer acquisition. It helps in understanding how much firm should spend on customer service to retain the customer and also helps in understanding who are the most valuable customer and accordingly work on future sales.