Customer acquisition is an important part of business operation. It helps to convince people to purchase their product and bring a new customer. It is also important to create brand awareness within the business organization which influences the purchase decision process of the customer (De Vries, Gensler & Leeflang, 2017). Zara is the most successful retail brand in the fashion industry. They have introduced dramatic reform with their business environment which has helped the organization to broaden its consumer spectrum. The company is obsessed with their customer which has made the cultural right of the organization. The company has used various strategies to create brand awareness and retain their customer which has made them successful with a broad customer base.
1. Company’s introduction
Zara is a clothing retailer brand, who has contributed a new trend to the clothing industry. The founder of Zara was Amancio Ortega in Spain in 1963. The parent corporation of Zara is owned by 60% INDITEX by the founder’s family. In the year 2005, Inditex has approved with 6.741 billion. The corporation Zara is having almost 2000 stores around the world. The corporation is very renowned in and out of the boundaries. The corporation offers a very wide range of choices for the collection of women, men and children as well. Along with it, the corporation launches the best cosmetics, perfumes and some household products as well. The brand focuses to make the product luxurious at a very reasonable price ("ZARA Official Website", 2021). The main target of the corporation is to make the standard lifestyle of the society along with making good revenue.
2. Definition of Customer value, satisfaction and retention
Customer Value: The customer value means; the satisfaction level of the consumers should be high. It is like a core concept for creating a good connection. In the world of business, it means the corporation has satisfied its marked consumers (Mahmoud, Hinson & Anim, 2018). If the consumer gets satisfied with the corporation, then he or she will visit again and again corporation. Although, they will be loyal or genuine consumers. However, the corporation like Zara, s making huge revenue from the targeted consumers. If the corporation will not fulfil the customer’s needs, then they might lose their consumers. Due to this, a huge amount of revenue can be deducted and the corporation will face huge loss and also the brand’s image will also go down in the market.
Customer satisfaction: The satisfaction of the customers means that the product which is perceived by the consumer or buyer has fulfilled their need and want. Sometimes due to the low performance of the employees or any defect in raw material, the customers may be dissatisfied and can shift to another brand due to which the corporation might suffer from huge loss (Rita, Oliveira & Farisa, 2019). When a corporation like Zara has designed a product that is as per the consumer’s expectation, then only the customer gets satisfied. If the corporation will produce an extraordinary product, then the consumer will be highly satisfied and get delighted with the product, which is very profitable for the corporation.
Customer retention: Customer retention refers to keeping a good connection and have a long journey with their customer. The connection with the customer is so deep, that they are no more customers but like a family. For creating this kind of trust and relation, Zara has to satisfy their customers by offering good products and services (Sabbeh, 2018). If Zara will not be able to do this, then might be the customers may get attracted to the products of their competitors. Besides this, it will be very expensive and time-consuming to attract another customer. There are many things that Zara have to think about and to stay their consumers. The product which is offered should be good and as per the consumer’s need. Along with it, the services have to be good, the only they will attract with the brand.
3. Calculation of Customer’s lifetime value
The Customer Lifetime Value (CLV) can be defined as the ‘current value of the cash flow of future’s can be recognized to the connection with customers’. This is a concept which looks forward, and it can be measured as a leading indicator of their fiscal transaction.
The formulae of Basic Customer Lifetime Value-
CMi* (Rr/ [1+δ -Rr] = ACi
Customer Contribution Margin= CMi
Retention rate (for customers) = Rr
Discount rate= δ
Consumer acquisition cost- ACi
Components of CLV:
The components of Customer Contribution Margin = CMi which show The Contribution Margin = CM of the single customer= i
The contribution margin is the customer revenue minus variable price which is associated with the demand of the consumers.
CLV= Existing Customer Equity + Future Customer Equity= (Total Past Sales) + [(Avg Order Value) * (Avg Number of Orders) * Max (0, (Avg Tenure- Current Tenure))]
Contribution Margin: It is to be measured with the help of a longitudinal customer cohort (cc). The measurement which is taken by cohort has permitted for the assignment of attainment price to the cohort (Jasek et al.,2019).
The Acquisition Cost (AC) is the price of the asset which is needed to create a scale (to create a consumer). The components which are given to the cost of acquisition are the cost to sell, advertising, collateral of marketing and events.
Aci= Ncc- (Act-1)
Aci= Customer Acquisition cost
Ncc= Number of customers in a cohort
Act-1= Total acquisition price from the previous period
4. Benefits of Customer Value
Zara knows the value of their precious customers and for this they taking many measures so that not a single customer changes the brand preference. Here are some of the benefits which are taken by Zara of Customer Value. They are as follows-
Save money- It is very easy and cheap to hold the old consumers rather than find a new one. When Zara knows their consumers then they are aware of the benefits which they seek and the corporation can focus on their resources. To find new customers is very time consuming and expensive too. The Zara have to advertise their brand in social media, radio, newspaper etc. to call the new customer is very costly. Except this, if the corporation will focus on the needs of the existing customer and offer them the best quality of the product then this will be more profitable and the consumers will be long lasting with the brand. In this was Zara can make good revenue (Mohd Satar, Dastane & Ma’arif, 2019).
Better marketing- The value of the customer can only be gain with better marketing and the products which are offered to the consumer have to be good. If Zara will not focus on the material and services which are offered to their existing customer then they may lose them. After that they will face huge loss along with their existing customer will surely be attracted by the competitors.
Inspire the loyalty of brand- If Zara can make daily contact can be permitted to adoptive their loyalty of their brand. The customer always wants some benefit from the corporation. So if Zara shows their customer that the products which are offered to them are best in quality and at a reasonable price along with the grand services then surely the consumers will get attracted to the brand (Foroudi et al., 2018). If the corporation will do this then its sales rate will be high. By which they can create a huge amount of profit and shortly they will get their goal as well.
5. The factors of Customer Lifetime Value and their advantages and disadvantages
The consumers want to know that the corporation from where they are buying products like Zara is just only creating profit from them. The genuine consumers wanted to be assured that they are purchasing from Zara is true cares for their consumer’s interest or not. For the betterment of this, Zara is having some factors of the Customer Lifetime Value and its advantages and disadvantages are as follows-
Choices- The Corporation have to understand and take proper care of their consumer’s choices. In this way, they can make accurate products for their customers. If Zara will look after this, then this will be very profitable for the corporation because they making accurate products. Along with it, here are some demerits as well, the corporation has to increase their number of staff who can look after for this (Dahana, Miwa & Morisada, 2019). At the same time, the corporation will not be able to create their brand and any new thing to the market.
Preference- The Corporation have to make the products as per the preference of customers. By this, the consumer will be forever connected with the brand. Along with it, the corporation will not be able to show something new to society and the taste and preferences of the consumers will remain the same.
Personalization- It is like a trend now, that the consumer is like to take personalize their products from the same brand. For this, the brand can take extra charges which is a profitable thing. Along with it, the brand will not be able to show their brand’s uniqueness in the product because that will be designed as per the personalization of the consumers (Oberoi, Patel & Haon, 2017).
6. Marketing Segmentation
Marketing segmentation refers to the process of dividing the target market into smaller categories. It is the process of segmenting the customer into smaller groups with similar characteristics based upon demography, interest, needs and location (Sinha, Shyam & Mehra, 2020).
Benefits of Marketing Segmentation
The major benefit of marketing segmentation is that it helps to focus on creating marketing efforts and reach the targeted audience to achieve the goals of the organization. It helps to understand the needs of the customer and provides the best potential ways to meet the demand of the product and the services (Aghaei, 2021). It also helps the organization to create better marketing strategies with the most effective marketing tactics.
Types of Marketing Segmentation
There are four major types of marketing segmentation. The diagram has been presented in the appendix below.
Demographic segmentation: It is the most common marketing segmentation strategy and is popularly used in places throughout the world. It is mainly defined with the statistical data of the particular group of audience of a certain area (Gómez & Pérez, 2018). The demographic market segmentation of Zara is mainly defined by the age, gender, income, location and ethnicity of the particular area.
Psychographic segmentation: The psychographic segmentation category is mainly defined by the personality and characteristics of customers. The psychography marketing segmentation include values, attitudes, interest, lifestyle, conscious and subconscious beliefs of the customer. Zara understands the psychography of the customer very well and makes products based upon their needs and demands (Haustein, Thorhauge & Cherchi, 2018).
Behavioural Segmentation: With the use of demography and psychography of the customer, Zara uses the behaviour segmentation of marketing as well that focuses upon the acts of the customer. The behavioural segmentation includes purchase habit, spending habit, The status of the customer and the brand interaction and connection with the custom behavioural segmentation is important to understand the actions of the customer (Huseynov & Y?ld?r?m, 2017). Zara understood the actions and behaviour of the customer in very close proximity.
Geographic Segmentation: Geographic segmentation is the simplest of all marketing segmentation. It is mainly characterized by geographic lines and borders and is helpful to understand the needs and demands of the customer. The geographic segmentation includes the country and location of the customer which mainly defines the purchasing habit of the customer (Gichuru & Limiri, 2017).
7. Critical evaluation of B2B and B2C decision-making models
The world of digital marketing is composed of B2B and B2C models. In many cases, B2B marketing focuses upon a logical building process to drive the purchasing decision of the customer whereas B2C marketing drives upon the emotional behaviour of the customer. It has been represented in the appendix below.
I. Customer Relationship
B2B: Create Personal Relationship
B2C: Create a transactional relationship
The B2B marketing mainly focuses upon creating personal relations with the customer to generate long term business opportunities. It is an important part of the buying cycle. It is the ability to connect with the audience and create brand awareness and long term growth and possibility (Ç?nar, Yetimo?lu & U?urlu, 2020). Zara has always tried to connect with their customer to understand their needs and requirement.
The B2C marketing strategy helps the organization to push their customer to purchase their product and drive the sale of the company. The B2C model believes in value efficiency and the customer has to spend very little time. This type of marketing will help to generate fast sales at quick successive intervals. Zara has created their website to generate fast sales and does not involve their customer in long term procedures.
B2B: Focuses on creating a relationship
B2C: Focuses upon prioritizing the message
Branding is the major part of the B2B marketing strategy. It is important to create international branding with the help of consistency in the presentation and the deliverance of the product and services. Zara always portrays itself with a shining personality that will help to create brand recognition and lead the present generation with the utmost fashionable clothing materials.
Branding is an important concept of marketing because it helps the marketer to deliver the message precisely and generate loyalty among the customer (López-López & Giusti, 2020). It is also important as it generates creditability and connects with the customer in an emotional manner which helps to motivate the buyer to purchase the product in an authentic.
III. Decision-Making Process
B2B: Maintaining open communication
B2C: Simplify the process
It is an important phase of maintaining open communication with the customer and act rationally in the business. Zara always maintains an open communication procedure to understand the needs of the customer (Hjelmeland & Panteleeva, 2021). It also helps Zara to compare their aspect of the organization to other competitors which prove to be an effective measure to step forward. It helps the organization to remain rational and motivate emotionally.
The B2C decision-making process helps to utilize the expertise in a conversion funnel which will help to maximize their ROI. The B2C marketer will help to create an influential advertisement that will help the customer to purchase the products easily and effectively. Zara always markets their product in a unique and influential manner that will help to simplify the decision-making process of the customer.
The major advantages of the B2B marketing process are that it helps to connect the customer emotionally.
This helps to generate high revenue and create positivity and simplicity among the customer.
They help to build a relationship with the customer with the help of open communication.
The B2C process is simple and effective to follow.
The major disadvantage of the B2C process is that it mainly focuses on generating revenue and does not worry about creating relationships and bonding with the customer.
The B2B process sometimes leads to confusion by understanding the demands and needs of the customer in a detailed manner.
The open communication method sometimes leads to disruption of information and proper connectivity with the customer.
8. Customer lifetime value and its importance in the business
The customer lifetime value is an important part of understanding the customer. It is will help to generate relationships with the customer which will enhance the business operation. The CLV will help the organization to understand the future value of the company and helps to generate marketing creativities (Lew, 2017).
The CLV will also help to design an efficient strategy to generate planning of budget. However, it has been observed that some customer brings more business than others. Therefore, it is important to identify the customer and must focus and investing in them.
Zara needs to calculate the customer lifetime value to retain the customer. The marketing metrics reveals that the probability of selling the new customer is only 5% -20% but the probability of selling to the existing customer is 60% -70%. It, therefore, identifies that the probability of selling to the repetitive customer is higher compared to the new customer. These loyal customers bring more business and profit (Lew, 2017). Therefore, Zara needs to create CLV among the customer and they also left no stones unturned to retain their loyal customers.
Thus, it can be concluded that satisfying the customer and giving them value is an important part of the business environment. It helps to retain the customer which brings higher revenue in the long term. There are various benefits of customer value to an organization that helps to influence CLV among the customer. The decision-making process has also various advantages and disadvantages which adds significant value to the customer as well as the organization.
1. Techniques to increase customer relation and customer loyalty
Zara has to focus on the connection which they are creating with their loyal customers. If the corporation will not be able to provide an accurate product, then might be the consumers can shift themselves to another brand (Juanamasta et al., 2019). So, for this, Zara has to use some of the techniques by which the customers can exist long-lasting with Zara. The techniques are ae as follows-
Give rewards to the consumers and not only just discounts.
Be the loyal first to attract consumers’ loyalty.
Make good relationships with consumers more than just business but like family.
Be honest with the customer even if it is no business for Zara.
2. Techniques and methods used at different stages to increase decision making process and increase customer lifetime value
The techniques and the methods which are used by Zara at various stages of the consumer’s decision-making process and customer lifetime value is very fruitful for both sides. Zara will have to go through with the proper knowledge of the consumers’ wants and preferences then only they will be delivering the products accurately. If some customers want to personalize their products, then the corporation can take extra charges for this. In this way the consumers will get their products as per their wants and Zara will be benefitted from the revenue.
The techniques which are used by Zara is all about loyalty which is the core thing for any corporation. The corporation is fully loyal to its consumers and delivers products at a reasonable price so that they will be satisfied. Along with it, Zara wants the same loyalty from their existing consumers as well. Occasionally, Zara also given rewards to their consumers, who will do the maximum amount of shopping, Zara will give a surprise gift to them along with many discounts on other products and coupons as well. Zara treats every consumer as a family and is very honest and loyal with the products.
Thus, it can be concluded that Zara is the most successful business in the field of the fashion industry. They have created an effective bonding with the customer which helps them to retain their customer on a long term basis. The company also has an efficient supply chain process which helps to deliver their product effectively. They have always developed the ability to understand the needs of the customer and predict their taste in the fashion industry at an affordable price range.
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Fig 1: Types of Marketing Segmentation
(Source: Sinha, Shyam & Mehra, 2020).
Fig 2: B2B and B2C marketing process
(Source: Ç?nar, Yetimo?lu & U?urlu, 2020)