Customer Profitability

15 Pages Posted: 21 Oct 2008 Last revised: 4 May 2018

See all articles by Paul Farris

Paul Farris

University of Virginia - Darden School of Business

Phillip E. Pfeifer

University of Virginia - Darden School of Business

Neil Bendle

University of Virginia - Darden School of Business

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Abstract

This technical note defines, describes, and illustrates the most common metrics marketers used to monitor and manage customer relationships. Among the metrics covered are customer counts, recency, retention rates, customer profitability, and customer lifetime value.

Excerpt

UVA-M-0718

Rev. Apr. 27, 2018

Customer Profitability

This note covers metrics that measure the performance of individual customer relationships. Just as some brands are more profitable than others, so too are some customer relationships more profitable than others. Customer profit is a metric that summarizes the past financial performance of a customer relationship. Customer lifetime value (CLV) looks forward in an attempt to put a dollar figure on existing customer relationships. One of the more important uses of CLV is to inform prospecting decisions.

This note also considers acquisition and retention spending—spending designed to acquire new customers and spending designed to retain and profit from existing customers.

. . .

Keywords: customer profitability Customer Relationship Management Customer Lifetime Value

Suggested Citation

Farris, Paul and Pfeifer, Phillip E. and Bendle, Neil, Customer Profitability. Darden Case No. UVA-M-0718. Available at SSRN: https://ssrn.com/abstract=910131

Paul Farris (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-0524 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/farris.htm

Phillip E. Pfeifer

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4803 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/Pfeifer.htm

Neil Bendle

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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