Comparison between Customer Lifetime Value (CLV) and Traditional Measurement Tools of Customer Value
Romanian international volume name: Turismul rural românesc în contextul dezvoltării durabile. Volume number: Volume XIII. Coordinators: I. Moraru, I. Talabă, A. Haller, D. Ungureanu, 2011. ISSN/ISBN: 978-973-702-858-7, p.122-131
8 Pages Posted: 18 Feb 2013
Date Written: April 1, 2011
Customer Lifetime Value (CLV), i.e. the present value of the monetary flows associated to the customer along his entire relationship with the company, has lately been a major topic of interest to researchers. Compared to traditional measurement tools, such as RFM (Recency, Frequency, Monetary Value), SOW (Share of Wallet), PCV (Past Customer Value) or CPA (Customer Profitability Analysis), CLV is more efficient in selecting profitable customers and subsequently, marketing resources will be better allocated and the segmentation of customers will be more efficient. Nonetheless, CLV is less used in the marketing practice of companies, especially due to the need of data, some aspects related to modeling (allocation of costs, accuracy of predictions) and the need of the change of the company’s philosophy, from product orientation to client orientation.
Keywords: CLV, customer value, RFM, customer segmentation
JEL Classification: M30
Suggested Citation: Suggested Citation