2
Strategic Marketing Management
1)
Decreases: When the churn rate increases with all other inputs in the LTV kept
constant, the customer lifetime value is likely to
decrease
. This is because the churn rate is
inversely proportional to customer lifetime value, as indicated by the equation.
CLV= 1/churn rate + Average revenue per account (ARPA)
Thus from the equation, it can be derived that the higher the churn rate, the lower the
customer lifetime value
(Chernev, 2018)
. This shows that the correct answer is customer
lifetime value will decrease.
2)
Increases: When the interest rate decreases and all other inputs of the LTV keep
constant, the customer lifetime value will
increase
.
3)
Customer acquisition, relationship development, and customer retention: LTV, as a
measure of the economic value of a customer, is used as a guide in marketing and product
decisions because it enhances customer acquisition, relationship development, and customer
retention
(Chernev, 2018)
.
4)
True: Customer value calculation in Harrah’s case study shows companies use
customer lifetime metrics like LTV to measure acquisition costs of marketing programs. This
shows that customer life metrics are used to measure the impacts of the marketing decisions,
actions, or tactics used.
5)
False: Customer lifetime value is affected by differences in costs, purchase volume,
and purchase frequencies, so when additional costs are increased, it means it will negatively
affect customer lifetime value and not increase it.
6)
Customer lifetime value can be improved once measured with customer loyalty
programs. This is because brand loyalty enhances customers to keep buying their goods and
services, which helps retain customers and decreases the churn rate. As such, companies
