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

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 profit...

Descripción completa

Detalles Bibliográficos
Autores: Damm, Raphael, Rodríguez Monroy, Carlos
Tipo de recurso: artículo
Fecha de publicación:2011
País:España
Institución:Universitat Politècnica de Catalunya (UPC)
Repositorio:UPCommons. Portal del coneixement obert de la UPC
Idioma:inglés
OAI Identifier:oai:upcommons.upc.edu:2099/11305
Acceso en línea:https://hdl.handle.net/2099/11305
Access Level:acceso abierto
Palabra clave:Customer services
Customer Lifetime Value (CLV)
Customer profitability
Non-financial values
Customer relationship management
Serveis d'atenció al client
Àrees temàtiques de la UPC::Economia i organització d'empreses::Gestió del coneixement
id ES_7414c034a5f2fe992fb5bcd01f6084d6
oai_identifier_str oai:upcommons.upc.edu:2099/11305
network_acronym_str ES
network_name_str España
repository_id_str
spelling A review of the customer lifetime value as a customer profitability measure in the context of customer relationship managementDamm, RaphaelRodríguez Monroy, CarlosCustomer servicesCustomer Lifetime Value (CLV)Customer profitabilityNon-financial valuesCustomer relationship managementServeis d'atenció al clientÀrees temàtiques de la UPC::Economia i organització d'empreses::Gestió del coneixementPurpose: 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. Besides the financial perspective of the CLV, non-financial perspectives such as customer advocacy, (customer or open) innovation and learning have been identified to have an impact on customer profitability. How to properly estimate a customer’s value taking all relevant value creating factors, financial as well as non-financial, into account is the underlying research question. Design/methodology/approach: This research is based on the review of a number of theoretical and empirical articles published between 1990 and 2010. The aggregation of measures, key-drivers and risks of each key-perspective of the customer relationship contributes to the development of a more systematic understanding of the value creation process and provides answers to the research question. Indirect effects of the CLV as a source of value have received increasing attention in previous research but are not sufficiently accounted for by mainstream methods for valuing customers (Ryals, 2008). Therefore, the attempt to structure available knowledge on indirect effects of the CLV in its contextual setting is made. Findings: This research is concluded providing evidence that one-dimensional calculations of the CLV deliver an incomplete picture of the customer relationship and estimate customer profitability incorrectly. This supports the idea of a multidimensional CLV approach that accounts for interrelated key-perspectives and results in superior resource allocation. Originality/value: Seeing customers in a comprehensive way helps to better understand their needs and potential contributions, so that long-term overall profitability can be advanced through the consideration of indirect effects. Indirect effects are usually not reflected in common accounting methods but might result in benefits for the firm. In this research, evidence is provided for the importance of indirect effects offered by customers. This makes the consideration of all relevant dimensions in the value creation process fundamental in order to allocate marketing resources in the most effective way.Peer ReviewedIntangible Capital20112011-11-0120112011-11-16journal articlehttp://purl.org/coar/resource_type/c_6501NAhttp://purl.org/coar/version/c_be7fb7dd8ff6fe43info:eu-repo/semantics/articleapplication/pdfhttps://hdl.handle.net/2099/11305reponame:UPCommons. Portal del coneixement obert de la UPCinstname:Universitat Politècnica de Catalunya (UPC)Inglésengopen accesshttp://purl.org/coar/access_right/c_abf2Attribution-NonCommercial 3.0 Spainhttp://creativecommons.org/licenses/by-nc/3.0/es/info:eu-repo/semantics/openAccessoai:upcommons.upc.edu:2099/113052026-05-27T15:37:01Z
dc.title.none.fl_str_mv A review of the customer lifetime value as a customer profitability measure in the context of customer relationship management
title A review of the customer lifetime value as a customer profitability measure in the context of customer relationship management
spellingShingle A review of the customer lifetime value as a customer profitability measure in the context of customer relationship management
Damm, Raphael
Customer services
Customer Lifetime Value (CLV)
Customer profitability
Non-financial values
Customer relationship management
Serveis d'atenció al client
Àrees temàtiques de la UPC::Economia i organització d'empreses::Gestió del coneixement
title_short A review of the customer lifetime value as a customer profitability measure in the context of customer relationship management
title_full A review of the customer lifetime value as a customer profitability measure in the context of customer relationship management
title_fullStr A review of the customer lifetime value as a customer profitability measure in the context of customer relationship management
title_full_unstemmed A review of the customer lifetime value as a customer profitability measure in the context of customer relationship management
title_sort A review of the customer lifetime value as a customer profitability measure in the context of customer relationship management
dc.creator.none.fl_str_mv Damm, Raphael
Rodríguez Monroy, Carlos
author Damm, Raphael
author_facet Damm, Raphael
Rodríguez Monroy, Carlos
author_role author
author2 Rodríguez Monroy, Carlos
author2_role author
dc.subject.none.fl_str_mv Customer services
Customer Lifetime Value (CLV)
Customer profitability
Non-financial values
Customer relationship management
Serveis d'atenció al client
Àrees temàtiques de la UPC::Economia i organització d'empreses::Gestió del coneixement
topic Customer services
Customer Lifetime Value (CLV)
Customer profitability
Non-financial values
Customer relationship management
Serveis d'atenció al client
Àrees temàtiques de la UPC::Economia i organització d'empreses::Gestió del coneixement
description 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. Besides the financial perspective of the CLV, non-financial perspectives such as customer advocacy, (customer or open) innovation and learning have been identified to have an impact on customer profitability. How to properly estimate a customer’s value taking all relevant value creating factors, financial as well as non-financial, into account is the underlying research question. Design/methodology/approach: This research is based on the review of a number of theoretical and empirical articles published between 1990 and 2010. The aggregation of measures, key-drivers and risks of each key-perspective of the customer relationship contributes to the development of a more systematic understanding of the value creation process and provides answers to the research question. Indirect effects of the CLV as a source of value have received increasing attention in previous research but are not sufficiently accounted for by mainstream methods for valuing customers (Ryals, 2008). Therefore, the attempt to structure available knowledge on indirect effects of the CLV in its contextual setting is made. Findings: This research is concluded providing evidence that one-dimensional calculations of the CLV deliver an incomplete picture of the customer relationship and estimate customer profitability incorrectly. This supports the idea of a multidimensional CLV approach that accounts for interrelated key-perspectives and results in superior resource allocation. Originality/value: Seeing customers in a comprehensive way helps to better understand their needs and potential contributions, so that long-term overall profitability can be advanced through the consideration of indirect effects. Indirect effects are usually not reflected in common accounting methods but might result in benefits for the firm. In this research, evidence is provided for the importance of indirect effects offered by customers. This makes the consideration of all relevant dimensions in the value creation process fundamental in order to allocate marketing resources in the most effective way.
publishDate 2011
dc.date.none.fl_str_mv 2011
2011-11-01
2011
2011-11-16
dc.type.none.fl_str_mv journal article
http://purl.org/coar/resource_type/c_6501
NA
http://purl.org/coar/version/c_be7fb7dd8ff6fe43
dc.type.openaire.fl_str_mv info:eu-repo/semantics/article
format article
dc.identifier.none.fl_str_mv https://hdl.handle.net/2099/11305
url https://hdl.handle.net/2099/11305
dc.language.none.fl_str_mv Inglés
eng
language_invalid_str_mv Inglés
language eng
dc.rights.none.fl_str_mv open access
http://purl.org/coar/access_right/c_abf2
Attribution-NonCommercial 3.0 Spain
http://creativecommons.org/licenses/by-nc/3.0/es/
dc.rights.openaire.fl_str_mv info:eu-repo/semantics/openAccess
rights_invalid_str_mv open access
http://purl.org/coar/access_right/c_abf2
Attribution-NonCommercial 3.0 Spain
http://creativecommons.org/licenses/by-nc/3.0/es/
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv Intangible Capital
publisher.none.fl_str_mv Intangible Capital
dc.source.none.fl_str_mv reponame:UPCommons. Portal del coneixement obert de la UPC
instname:Universitat Politècnica de Catalunya (UPC)
instname_str Universitat Politècnica de Catalunya (UPC)
reponame_str UPCommons. Portal del coneixement obert de la UPC
collection UPCommons. Portal del coneixement obert de la UPC
repository.name.fl_str_mv
repository.mail.fl_str_mv
_version_ 1869410855986135040
score 15,300719

Similares en LA Referencia