Syeda Erum Fatima 29204

ANSWER TO QUESTION 1

From my point of view, I think customer loyalty is very important to a car dealer even though
most people buy a new car every few years. First, although most people can afford to buy a few
cars for the rest of their lives, it is possible that people may buy more than one car. Therefore,
customer loyalty can be one of the most important factors that can influence the decision that
they want to buy a car of the same type again. Second, high customer loyalty can enhance the
word-of-mouth effect, which can have a positive impact on car sales. Investing time, energy and
money in promoting customer loyalty in cars, should be an important part of it. The importance
of hosting existing clients should not be overlooked. Progress in improving customer resilience
(or customer loyalty) is at the core of the automotive business objective for these reasons.

 Word-of-Mouth Advertising

Loyal customers bring you new customers. Customers have a strong relationship with
businesses that they often talk about. Happy and satisfied customers who keep coming
back to you are more likely to pass on to others who may need a new car.

 Protects you from the Competition

The more loyal your customers are, the more secure you will be from the competition.
Establishing a strong product reliability can make you more vulnerable to competitive
forces. This is especially important in areas where new players often enter the market.

 Manage the Mistakes

Let's face it; things get worse sometimes - even in the big business. Reliable customers are
more likely to ignore mistakes. If you maintain the level of customer service and quality
required to achieve customer loyalty in the first place, your customers will be willing to
forgive you when bad things happen.

ANSWER TO QUESTION 2

Customer life time value defines the current net worth (NPV) for future profit streams expected
from the purchase life of the customer. The company must deduct from its proceeds the
expected cost of selling and servicing that customer's account.so by using the discount rate we
can estimate CLV.

CLV=∑(Pt-Ct)÷(1+i)^t-Ac
Where
Pt= Price paid by a customer at time t
Ct=direct cost of servicing the customer at time t
i=discount rate or cost of capital for the firm
rt=probability of consumer repeat buying or being “alive” at time t
AC=acquisition cost,
T=time horizon for estimating CLV

Imagine Audi's profit per car is $ 7000. On average a customer purchase car every five years
and at the time of purchase 10 cars so the profit from the customer will be $ 70,000 so at 15%
of the NPV discount rate will be is an Audi CLV.

ANSWER TO QUESTION 3

In a competitive market, customer satisfaction and honesty can be a key determinant of a long-
term firm.
Audi can build long-term loyal relationships with its customers through

• Participate with its customers in a timely manner, ensuring that they receive all support
before requesting. e.g., a company should be aware of the engine oil change planned for
the vehicle.
• Understanding what Audi offers its customers, and keeping it.
• If Audi wants to keep customers riding longer, it should understand how customers
engage with their vehicles throughout their journey with them.
• Put customers first by knowing who needs immediate attention.