Managing Customer Relationships Using Customer Lifetime Value and Customer Equity Metrics

Abstract

The move towards a customer-centric approach to marketing, coupled with increasing availability of customer transaction data, has led to an interest in customer valuation concepts like Customer Profitability (CP), Customer Lifetime Value (CLV), and Customer Equity (CE). However, the customer profitability metrices are short-sighted, as they focus merely on the current profitability of current customers. In fact, they are the least powerful tool for customer valuation.