A review of the customer lifetime value as a customer profitability measure in the context of customer relationship management

Abstract

Purpose: A number of customer metrics allow estimating customer profitability with methods such as the Customer Lifetime Value (CLV). However, investments in customer relationships carry the potential risk to destroy value and reduce profitability when based on incorrect estimates of customer profitability. Therefore, estimating future customer value correctly is essential to allocate marketing expenditures in the most effective way. In this article recent literature about the CLV is reviewed in order to assess its ability as a customer profitability measure.