Customer Lifetime Value in a Model of Dynamic Competition

35 Pages Posted: 8 Nov 2014

See all articles by Gerasimos Lianos

Gerasimos Lianos

Southwestern University of Finance and Economics

Igor Sloev

National Research University Higher School of Economics

Date Written: September 18, 2014

Abstract

We study the structure of optimal customer acquisition and customer retention strategies in an infinite horizon model of a firm in a competitive industry. We examine the effects of changes in customer profitability, density of competition, and discount rate on the optimal allocation of marketing budget. We obtain a number of normative propositions and testable hypotheses at the level of the individual firm and the industry. We establish the connections between the problem of maximizing Customer Equity and the problem of maximizing the Value of the Firm.

Keywords: Customer Lifetime Value, Customer Acquisition, Customer Retention, Customer Equity

JEL Classification: M20. M30, M31

Suggested Citation

Lianos, Gerasimos and Sloev, Igor, Customer Lifetime Value in a Model of Dynamic Competition (September 18, 2014). Available at SSRN: https://ssrn.com/abstract=2520323 or http://dx.doi.org/10.2139/ssrn.2520323

Gerasimos Lianos (Contact Author)

Southwestern University of Finance and Economics ( email )

Chengdu, 610074
China

Igor Sloev

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

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