Customer lifetime value: Marketing models and applications

Abstract

Companies dealing with a large customer base and especially those with infrequent purchase or service interactions face the challenge of developing and maintaining a long-term relationship with customers. In addition to offering products for sale, marketing communications can add significantly to the customer relationship and brand-building process. Traditionally, customer contact is maintained using a campaign-oriented, effort-by-effort approach to selecting customers for contact. This paper suggests development of a Longitudinal Contact StrategyTM to plan customer contacts over a substantial time horizon. Data analysis can be used to determine (a) what to say to the customer, (b) when to make the contact, and (c) how much to spend on each customer. Results can be measured by comparing the cumulative marketing expense to the cumulative revenue produced.