QUESTION THREE [25]

Not all customers have the same potential for profitability, so companies need to determine where to focus their efforts. Understanding and analyzing Customer Life Time Value is central to deciding whether targeting and spending marketing and sales budget on a given customer is really good for the business. The critical point about CLV is that it looks at profit margin and not revenues. Whilst a customer might offer a decent flow of revenues, the spending needed to keep that customer sweet may make continuing investment in the relationship strategically unsound because, in the end, the margins are minimal.

With regards to the above extract examine the strategies an organisation could utilise in order to cultivate customer relationships.