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.

This paper:

  • 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.
Key Insights:
  • 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.
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