BUYER LIFETIME VALUE: MARKETING TYPES AND APPLICATIONS
Paul Deb. Berger Nada I. Nasr
ABSTRACT Customer lifetime value has been a mainstay concept in direct response marketing for many years, and continues to be increasingly regarded in the п¬Ѓeld of general marketing. However , the vast majority of literary works on the topic (a) has become dedicated to extolling its employ as a decisionmaking criterion; (b) has presented isolated statistical examples of their calculation/determination; and (c) provides considered it as part of the basic discussions of proп¬Ѓtability and discussed it is role in customer buy decisions and customer acquisition/retention trade-offs. There has been a dearth of standard modeling in the topic. This paper shows a series of numerical models pertaining to determination of customer life span value. Picking out the designs is based on a scientific theoretical taxonomy and on presumptions grounded in customer tendencies. In addition , selected managerial applications of these basic models of client lifetime worth are offered.
PAUL D. PATRE is Professor and Chief of the Promoting Department on the School of Management, Boston University.
NADA I. NASR is a tragique student in Marketing on the School of Management, Boston University.
98 John Wiley & Sons, Inc. and Direct Promoting Educational Base, Inc. CCC 1094-9968/98/010017-14 t JOURNAL OF INTERACTIVE MARKETING VOLUME 12 / NUMBER 1 / WINTERTIME 1998
12-24-97 10: 12: 35
Watts: Dir Mktg
JOURNAL OF INTERACTIVE ADVERTISING
Since the early eighties, the п¬Ѓeld of marketing has undergone a significant directional change in both its theory and practice: a turn toward relationship promoting (Morgan & Hunt, 1994). At the core of relationship marketing is the creation and maintenance of long-term interactions with buyers, rather than merely a series of discrete transactions, achieved by creating excellent customer benefit and pleasure. Ideally, a loyalty that beneп¬Ѓts each is fostered. One mistake of this developing concern to take care of strong and long-lasting associations, however , is usually to do it at the expense of proп¬Ѓtability. Extremely enthusiastic with the concept, many practitioners include gotten linked to losing interactions. Relationship advertising is high priced. It might not pay to keep long-term human relationships, at least not all enough time and not with all customers. Buyers with low switching costs and brief time-horizons might not be п¬Ѓnancially attractive to the п¬Ѓrm (Jackson, 1985). Ultimately, marketing is the artwork of getting and keeping proп¬Ѓtable customers (Kotler & Armstrong, 1996). A company probably should not try to pursue and satisfy every customer. What makes a client proп¬Ѓtable? Kotler and Armstrong (1996) deп¬Ѓne a proп¬Ѓtable customer because вЂвЂa person, household, or perhaps company whose revenues with time exceed, simply by an acceptable quantity, the company costs of bringing in, selling, and servicing that customer. '' This excess is called consumer lifetime benefit (CLV). Customer lifetime benefit should be a crucial construct in designing and budgeting several marketing decisions such as consumer acquisition programs (Dwyer, 1989). Recognizing their importance, various researchers in direct promoting have studied CLV and its particular managerial applications (Dwyer, 1989; Hughes & Wang, 95; Keane & Wang, 1995; Wang & Splegel, 1994). A growing involvement in CLV is definitely expected consist of marketing areas for two causes. First, each time when marketing methods are becoming even more interactive, by frequent-userclub providers to web pages, it is not unexpected that advertising talk starts to sound like directmarketing talk (Blattberg & Deighton, 1996).
Second, changes in technology make it feasible to figure out and track customer behaviors in ways that were impractical, or maybe impossible, during the past (Jackson, 1995). Previous exploration in CLV has extolled the advantage of the use in a number of marketing decision problems, mainly focusing on...