Foundations and Trends® in Marketing > Vol 2 > Issue 1

Customer Lifetime Value — The Path to Profitability

V. Kumar, J. Mack Robinson College of Business, Georgia State University, USA, vk@gsu.edu
 
Suggested Citation
V. Kumar (2008), "Customer Lifetime Value — The Path to Profitability", Foundations and Trends® in Marketing: Vol. 2: No. 1, pp 1-96. http://dx.doi.org/10.1561/1700000004

Published: 20 Aug 2008
© 2008 V. Kumar
 
Subjects
Customer Relationship Management,  Customer Equity
 

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In this article:
1 Introduction
2 Why is Customer Lifetime Value Relevant and Important?
3 Traditional Metrics for Managing Customer Loyalty
4 Measuring CLV
5 Drivers of CLV
6 How Can CLV Measure be Used for Developing Customer-Centric Strategies?
7 Implementing CLV Framework in a B2B and B2C Scenario
8 Organizational Challenges in Implementing a CLV-Based Framework
References

Abstract

This survey talks about Customer Lifetime Value (CLV) as a metric that would help managers make informed usiness decisions. While there have been prior articles that take an extensive and in-depth look at Customer Equity (CE)(Villanueva and Hanssens, 2007), this survey reviews the CLV metric in particular. The definition and approaches to compute CLV and the concept of customer equity are discussed in detail. Specifically, this survey provides methods for measuring CLV, the strategies for developing customer-centric strategies, the implementation of CLV strategies in a B2B and B2C setting, and the challenges faced by an organization in implementing a CLV-based framework. This survey details the importance of CLV as a metric in a marketer's toolkit and how it is relevant to managing customers.

DOI:10.1561/1700000004
ISBN: 978-1-60198-156-1
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ISBN: 978-1-60198-157-8
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Table of contents:
Introduction
Why is Customer Lifetime Value Relevant and Important?
Traditional Metrics for Measuring Customer Loyalty
Measuring CLV
Drivers of CLV
How can CLV Measure be used for Developing Customer-Centric Strategies?
Implementing CLV Framework in a B2B and B2C Scenario
Organizational Challenges in Implementing a CLV-Based Framework
References

Customer Lifetime Value

Customer Lifetime Value - The Path to Profitability reviews the CLV metric in particular. Approaches to computing CLV and the concept of customer equity are discussed in detail. Specifically, this monograph provides the methods of measuring CLV, the strategies for developing customer-centric strategies, the implementation of CLV strategies in a B2B and B2C setting, and the challenges faced by an organization in implementing a CLV-based framework. The author details the importance of CLV as a metric in a marketer's toolkit and how it is relevant to managing customers. Customer Lifetime Value - The Path to Profitability answers the following questions: What is the value of a customer? Can customers be evaluated based only on their past contribution to the firm? Which metric is better in identifying the future worth of the customer? These are the questions a firm has to deal with before assessing the value of its customers. The author shows that the value of a customer is the value the customer brings to the firm over their lifetime. Therefore, we need a metric that can objectively measure future profitability of the customer to the firm. Customer lifetime value (CLV) helps managers make informed business decisions.

 
MKT-004