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This customer lifetime value (CLV) study developed and refined an instrument to measure CLV from a retailer's perspective using both financial and nonfinancial constructs. The authors created scale items to measure the financial (monetary value and marketing costs) and nonfinancial constructs (trust, loyalty, purchase frequency, recency, and churn rate). They assessed composite reliability as well as discriminant and convergent validity. A varimax rotation indicated strong items for trust and recency under the nonfinancial factors as well as monetary value and marketing costs under the financial factors. Additionally, the measurement model indicated a strong model fit. The findings reinforce the notion of using financial factors to determine CLV. However, nonfinancial factors are also relevant for explaining CLV. These findings fundamentally shift the argument about the determinants of CLV as well as open the door for further research about the nonfinancial factors of CLV. This is the first study to create scale items for measuring the financial and nonfinancial constructs of CLV. The research provides useful theoretical and managerial insights regarding the consideration of nonfinancial factors for refocusing marketing and retailing efforts toward consumers. The study findings reinforce the notion that all customers are not equally valuable. [ABSTRACT FROM AUTHOR]

The measurement of customer lifetime value (CLV) has long been of primary interest to marketing research. To date, almost all CLV modeling studies have been conducted in either the contractual or the non-contractual transaction setting. The semi-contractual transaction setting, however, has been increasingly observed lately but rarely studied. In this article, we deal with the CLV measurement in one type of semi-contractual transaction setting, in which firms can unilaterally terminate their transaction relationship with customers under certain conditions, resulting customers' survival duration being artificially truncated. We propose an innovative model to capture CLV in the setting, which consists of two sub-models. The first sub-model is a novel customer base analysis (CBA) model, BG-t/BB. It adds an "artificially truncated" feature to the classic BG/BB model. This BG-t/BB model is then augmented by a monetary value (MV) sub-model, Gamma-Gamma, so that we can capture each customer's overall monetary value. We also develop and report a systematic plan for data collection and model testing, and then discuss how our model can be used to support managers to determine the optimal customer termination timing. [ABSTRACT FROM AUTHOR]

Taking paying customers as the point of departure, this article develops a mathematical approach linking the explicit financial worth of the paying customer (customer lifetime value) to the implicit social value of the nonpaying customer (word of mouth). When paying customers talk about their purchases in online social networks, word of mouth is spread from the paying customer to nonpaying customers (who may act on this information by either converting to a paying customer or remaining a nonpayer but spreading more word of mouth). Drawing on graph theory, we propose a conceptual method for calculating the financial value of the word of mouth shared between paying and nonpaying customers in a hypothetical social network (network value). Consequently, an aggregate metric, termed total network value, is also derived as the sum of all network value connections between paying and nonpaying customers in a social network. Implications for strategic marketing decisions and the need for empirical work are discussed. [ABSTRACT FROM PUBLISHER]

That a firm benefits most when customers stick around for the long haul is a central premise of relationship marketing. This conviction has manifested itself over the past decade in the form of numerous formal loyalty programs that aim to seek and foster customer relationships. Scant evidence for the success of such programs has accrued since. This has lead firms to re-evaluate their investments in customer relationship management. Optimal resource allocation models address issues of relative investments in customer acquisition versus retention, and on managing relationships with profitable customers so that the value of a firm's customer base is maximized. [ABSTRACT FROM AUTHOR]

Customers' willingness to serve as marketing resources to the firm has been largely neglected by the relationship marketing literature. This dimension has gained greater importance to relationship marketers, due in part to the uncertain regulatory future of consumer privacy protection in the U.S. Our model examines the linkage between relational commitment to key strategic marketing resources and patronage outcomes, including actual customer revenues. Research findings support our argument for adding the dimension of strategic marketing resources to existing CLV models to more fully capture customer equity. doi:10.1300/J366v06n02_05 [ABSTRACT FROM PUBLISHER]

The authors examine the relationship marketing research literature and identify three schools of thought regarding relationship marketing. The Inter-organizational, customer relationship, and customer valuation research perspectives are described and representative studies are discussed. The predominant conceptual approaches to marketing productivity in the research literature are identified and described. The shareholder value model of Srivastava, Shervani, and Fahey (1998) is selected as the most useful conceptual framework linking relationship marketing and marketing productivity. The linking constructs of customer equity and brand equity are identified as the critical conceptual connections between relationship marketing and marketing productivity. A research agenda is suggested, covering both conceptual and operational issues for further development of both relationship marketing and marketing productivity. doi:10.1300/J366v06n02_03 [ABSTRACT FROM PUBLISHER]

The concept of Customer-Perceived Value (CPV) has become a matter of increasing concern in marketing literature. However, there are few empirical studies that attempt to examine the notion of it. Filling this gap, this study provides a conceptual as well as empirical investigation of CPV as a formative construct and also offers an insight regarding the role of CPV in influencing, through satisfaction and loyalty, the behavioral intentions of word of mouth, repurchase intention and cross-buying. Furthermore, the potential moderating role of social pressure in the relationship between satisfaction and loyalty is also examined. The results suggest that delivering superior customer value enables a firm to achieve favorably behavioral intentions. Implications for practice, study limitations and future research are discussed. [ABSTRACT FROM AUTHOR]

Most companies do a very poor job of determining the economic value of their customers. There are three primary reasons that this has been the case: (1) inadequacy of technology, (2) managements' internal focus on products (as opposed to customers), and (3) inadequacy of accounting systems. Each of these areas, however, has undergone rapid transformation in terms of their sophistication and managerial usefulness. As a result, it is manifest destiny that asset valuation and management will evolve to the evolution of a company's most fundamental asset, its customers (i.e., customer lifetime value). Most managers have come to accept this inevitability. What managers fail to realize is just how radically an understanding of customer lifetime value will transform the business landscape. It will dramatically impact the breadth and type of data collected: the way managers view and segment customers; the types of experiences firms offer customers; the metrics executives provide to the financial markets; and the way companies structure and staff their organizations. [ABSTRACT FROM AUTHOR]

We develop a framework in which internal employees' diagnoses of their firm's service climate determine their role behavior towards customers and, ultimately, customer satisfaction, loyalty, retention and shareholder value. Elements of the framework include: (1) foundation issues (fundamental human behavior issues like the presence of necessary resources and the quality of leadership), (2) internal service (the quality of service employees report they receive internally from others), (3) service climate (the degree to which management emphasizes service quality in all of its activities), and (4) customer-focused service behavior. How this research is done is reviewed and research supporting elements of the framework is described. How the approach can be adapted for promoting CLV goals is explicated and answers to some frequently asked questions about change to an organization with a service quality and CLV focus are described. [ABSTRACT FROM AUTHOR]

Unlike most marketing metrics, CLV provides information which is directly relevant to marketing decision makers, non-marketing executives such as CFOs, and financial analysts. This paper highlights why and how CLV is financially relevant. It explicitly compares CLV-based valuation with four finance-oriented methods (DCF, P/E ratio, customer counting, and extrapolation). We also discuss implications for marketing managers, financial executives as well as educators. [ABSTRACT FROM AUTHOR]

Customer lifetime value (CLV) models are designed to identify high-value customers to be retained. By implication, the remaining customers must be divested. This aspect of CLV management, customer divestment, has not been addressed in research. In this paper we describe the process of customer divestment, report a framework enabling firms to implement customer divestment (Mittal, Sarkees, and Murshed, 2006), and identify key issues associated with the customer divestment process. In doing so, we formulate some key research questions and an agenda for future research. [ABSTRACT FROM AUTHOR]

In this article, we examine current trends in customer lifetime value and customer segmentation models and identify key issues for future research. CLV-based segmentation is a segmentation approach that groups customers into meaningful segments based upon customer lifetime value and (potentially) other factors. In the article, we discuss the extent to which CLV-based segmentation meets the criteria for effective segmentation. We also identify six areas for future research: (1) models and management of "micro-segments," (2) using CLV-based segmentation to improve the efficiency of marketing programs, (3) the need for more dynamic CLV-based segmentation models, (4) applying CLV-based customer segmentation to new products and new customers, (5) challenges associated with implementing CLV-based segmentation, and (6) the need lot new models that enable firms to segment customers by response to marketing activities and CLV at different points in the customer decision process. [ABSTRACT FROM AUTHOR]

Determining and managing customer lifetime value is one of the most important strategic objectives of companies today. This paper critically examines some of the most popular approaches traditionally used to measure the value of customers in a company's portfolio. The methods reviewed include RFM and total revenue approaches to differentiating the value of customers. Although these methods have relative advantages, they have serious drawbacks that limit the ability of managers to accurately assess customer value. All alternative model for the measurement and management of customer value is proposed, [ABSTRACT FROM AUTHOR]

It is becoming increasingly clear from the literature that there is a need for a metric that can objectively measure future profitability of the customer to the firm. This paper traces the emergence of such a metric-the customer lifetime value (CLV) and discusses the two measures of computing CLV-the aggregate approach and the individual level approach. Subsequently, eight strategies that are available to firms for maximizing CLV are discussed. These strategies assist firms in deciding how to: select the best customer, make loyal customers profitable, optimally allocate the resources, pitch the right product to the right customer at the right time, link acquisition and retention to profitability, prevent customer attrition, encourage multi-channel shopping behavior, and maximize brand value. Each of these strategies was successfully implemented by different firms across various industries, resulting in significant increases in the bottom-line. Further, the challenges in implementing a CLV-based framework in a B-to-C organization are also discussed with an illustration. [ABSTRACT FROM AUTHOR]

In the quest for sustainable competitive advantage, managers have sought to differentiate themselves through a customer (as opposed to product) focus. This has given rise to successive strategies designed to improve the customer experience (e.g., objective quality, service quality, customer satisfaction, customer retention, customer loyalty, etc.). The problem, however, is that a satisfied, loyal customer who is persuaded to consistently buy a firm's product or service over and over again because of its quality can be and often is unprofitable. [ABSTRACT FROM AUTHOR]

The management of customer equity is becoming a major issue for firms. Traditionally, firms have concentrated on lifetime customer value and the assets that a firm can derive through relationships with customers who have high lifetime value or high equity. The majority of research in this area has examined strategies used to maximize sales and profits from high lifetime value customers. The present research examines strategies that firms need to follow with customers with low lifetime value. This paper suggests that firms develop strategies for "transactional" and "discount" customers who have traditionally been classified as low lifetime equity customers. Through an examination of extant literature and industry strategies the paper examines the reasons for ignoring these segments, and proposes strategies that will enhance segment penetration and firm performance. Implications for managers are also highlighted. [ABSTRACT FROM AUTHOR]

The customer equity concept has attracted substantial interest from academics and practitioners during the last years. While direct drivers of customer equity such as customer transactions, cross- and up-buying behavior have been well understood and researched, indirect effects, and in particular social network effects have been ignored, although it is well known that brand community influence, word of mouth communication and other social effects are powerful influencers of buying behavior and should thus not be ignored in customer management. Thus, we propose that the customer equity perspective should evolve into a customer network equity perspective. In the following, we develop und present a theoretical framework for extending current thinking on customer equity towards the network perspective. In particular, we derive, based on the social network literature, characteristics that are likely to be powerful predictors of a customer's network value. We make propositions for future research and highlight practical implications. [ABSTRACT FROM AUTHOR]