chapter  CLV
30 Pages

The Databased Approach

KEYWORDS. Customer Lifetime Value, customer equity, profitability, ROI, customer loyalty, customer acquisition and retention, marketing resource allocation, brand value/brand equity, multichannel shopping, dynamic churn


In the past two decades, the firms tended to focus on either cost management or revenue growth. When a firm adopts one of these approaches it loses out on the other (Rust, Lemon, & Zeithaml, 2004). For instance, if a firm focuses only on revenue growth without emphasis on cost management, it fails to maximize the profitability. Similarly, cost management without revenue growth affects the market performance of the firm. Therefore, balancing the two becomes essential for a firm that expects to create market-based growth while carefully evaluating profitability and return on investment (ROI) of marketing investments. In other words, the key to success lies in optimal allocation of resources/ efforts across profitable customers and cost-effective customer-specific communication.