| Abstract: | SUMMARY It is becoming increasingly clear from the literature that there is a need for a metric that can objectively measure future profitability of the customer to the firm. This paper traces the emergence of such a metric—the customer lifetime value (CLV) and discusses the two measures of computing CLV—the aggregate approach and the individual level approach. Subsequently, eight strategies that are available to firms for maximizing CLV are discussed. These strategies assist firms in deciding how to: select the best customer, make loyal customers profitable, optimally allocate the resources, pitch the right product to the right customer at the right time, link acquisition and retention to profitability, prevent customer attrition, encourage multi-channel shopping behavior, and maximize brand value. Each of these strategies was successfully implemented by different firms across various industries, resulting in significant increases in the bottom-line. Further, the challenges in implementing a CLV-based framework in a B-to-C organization are also discussed with an illustration. |
