Applications of CRM in B2B and B2C Scenarios (Part I)

Abstract

AbstractThis chapter defines the concept of Customer Lifetime Value (CLV) and provides an approach to compute CLV. In simple terms, CLV refers to the net present value of future cash flows from a customer. Using a numerical example, this chapter provides the approach and formula to compute CLV. It also discusses the various drivers that can maximize CLV for both B2B and B2C firms. Further, the chapter discusses some of the proven strategies to maximize customer profitability. First, the chapter discusses the relationship between customer lifetime with the firm and the resulting profitability. Based on this relationship, this chapter discusses a model that can be used to measure the lifetime values of customers when they share a noncontractual relationship with the firm (i.e., a relationship in which customers are not bound by contracts). Second, a model for incorporating customers’ projected profitability into lifetime duration computation is discussed. This model builds on the idea and approach discussed in the first model. Finally, a model for identifying the true value of a lost customer is also discussed.KeywordsContribution MarginCustomer Lifetime ValueLoyal CustomerPurchase AmountCustomer LifetimeThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.