Using Customer Lifetime Value for Acquiring, Retaining, and Winning Back Profitable Customers
What is customer lifetime value, and how do we determine which types of customers and future prospects to retain, grow, acquire, or win back?
Companies historically have used backward-looking metrics to attempt to understand which customers were worth investing in. As a metric, customer lifetime value (CLV) combines the probability of future customer activity to create a forward-looking metric that is more appropriate for deciding which customers to acquire, retain, or win back.
- Defines CLV.
- Links CLV to Shareholder Value.
- Discusses strategies for implementing CLV
- Presents approaches to determine:
- Which types of customers and future prospects to retain, grow, acquire, or win back (and which to not).
- How much to spent on the various micro-segments to retain, grow, acquire, and win back these customers.
- CLV helps distinguish profitably loyal customers in the customer pool.
- Success with managing through CLV lies in transforming a firm’s focus from product-centric to customer-centric marketing.