A marketing view of the customer value: Customer lifetime value and customer equity

A M Estrella-Ramón,G Swinnen,M Sánchez-Pérez,K Vanhoof

doi:10.4102/sajbm.v44i4.168

A M Estrella-Ramón, G Swinnen + Show 2 more

Open Access

https://doi.org/10.4102/sajbm.v44i4.168

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Abstract

Throughout this research the customer valuation trend in marketing is going to be reviewed, emphasizing Customer Lifetime Value and Customer Equity measures. The main theoretical contributions in the development and evolution of the Customer Lifetime Value concept are analysed. Customer Lifetime Value is also differentiated from Customer Equity and Customer Profitability analysis to estimate customer value in terms of firm profitability. Customer Lifetime Value and Customer Equity concepts are formally defined. Additionally, a classification of a set of published researches into Customer Lifetime Value and/or Customer Equity is developed. This classification has been posited according to several criteria that serves as a guide to key requirements for developing these types of models. Finally,several conclusions, suggestions and future research streams are highlighted.

Highlights

Customers have become the alma mater of any organization, because without them there wouldnt be incomes, benefits and the resulting market value of the company (Gupta & Lehmann, 2003; Gupta & Zeithaml, 2006)
Nowadays Customer Lifetime Value (CLV) is the most popular customer value measure because (1) many traditional marketing measures are not enough to evaluate returns of marketing investment, especially in the long-term, (2) includes all the elements of Customer Profitability (CP), (3) it is forward-looking, and (4) it is an essential element of the customer-centric paradigm (Kumar & Shah, 2004), mainly because it is meaningful for managers to understand customer value at the individual level to allocate resources (Zhang, Dixit & Friedman, 2010)
We have developed a classification of CLV and Customer Equity (CE) models by combining and updating several criteria taken into account by previous reviews about this topic (see for example Calciu (2009), Fader and Hardie (2009), Gupta et al (2006), Kumar and George (2007) and Villanueva and Hanssens (2007))

Summary

Introduction

Customers have become the alma mater of any organization, because without them there wouldnt be incomes, benefits and the resulting market value of the company (Gupta & Lehmann, 2003; Gupta & Zeithaml, 2006). Nowadays CLV is the most popular customer value measure because (1) many traditional marketing measures (e.g., brand awareness/attitude, market share) are not enough to evaluate returns of marketing investment, especially in the long-term, (2) includes all the elements of CP, (3) it is forward-looking, and (4) it is an essential element of the customer-centric paradigm (Kumar & Shah, 2004), mainly because it is meaningful for managers to understand customer value at the individual level to allocate resources (Zhang, Dixit & Friedman, 2010) For these reasons, we focus on the second and third stages of customer valuation (i.e., CLV and CE) to develop this research, closer to the marketing discipline (research on modelling CLV was one of the MSI research priorities (MSI, 2004)) and characterized by more complete analysis, taking into account a greater number of variables ( financial, as in the first case). Is an arithmetic calculation of revenues minus costs for a specified period of time This measure is calculated on a single period basis, usually the last economic year

Source of data

Findings

Level of aggregation in the data for the CLV calculation