- Customer Lifetime Value
- Aligning Customer Management Strategies with the CLV Metric
This chapter is from the book
This chapter is from the book
This chapter is from the book
Aligning Customer Management Strategies with the CLV Metric
Figure 1.5 illustrates a typical customer life cycle scenario. Based on the location of the customer on the life cycle plot, the firm can extend acquisition, retention, or customer win-back strategies in an effort to speed acquisition, increase revenue during retention, and delay attrition. The net result is a lift in customer value. This is denoted as strategic impact in Figure 1.5.
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Figure 1.5 Typical customer life cycle scenario
The rest of this book takes an in-depth look at powerful customer-level strategies relevant to virtually any business in the business-to-consumer (B2C) or business-to-business (B2B) domain. With regard to the customer acquisition stage, this book covers how firms can go about acquiring profitable customers, the best metric to use while acquiring customers, and how to use customer referral as a strategic tool to acquire new customers. With regard to the retention stage, this book examines how firms can manage customer value, loyalty, and profitability simultaneously; that is, how can they pitch the right product to the right customer at the right time. With regard to the customer attrition stage, this book discusses dynamic proactive strategies to prevent losing customers. Deployment of these customer-level strategies has resource allocation consequences that lead to greater cost and profit efficiencies. This book talks about reallocation of resources across different channels to increase the level of interaction and hence spending per customer. Resource allocation across customers helps in the prudent reallocation of limited marketing budgets from low-profit customers to customers who are expected to provide higher profits in the future. Resource allocation across marketing activities seeks to balance marketing budgets across acquisition and retention strategies. The net result of all customer-level initiatives is a higher return on marketing activities. However, this is often an impediment in the wake of strategy-implementation challenges at the organizational level. These challenges have been addressed in a separate chapter of the book. The book chapters relevant to each strategy/topic are indicated in parentheses in Figure 1.5. All strategies are state-of-the-art, with a proven track record of unprecedented success when implemented at select Fortune 500 corporations.