《customer lifetime valuation to support maketing decisions making》.pdf

F. ROBERT DWYER Customer Lifetime Valuation to Support Marketing Decision Making F. ROBERT DWYER is CBA Professor and Director of the Direct Marketing Policy Center in the College of Business Administration at the University of Cincinnati. His research on buyer-seller relationships and has appeared in the Jour- nal of Marketing,the Journal of Marketing Research,the Journal of Direct Marketing,and elsewhere. He serves on the editoral boards of these same publications. Partial funding of this research was provided by the Direct Marketing Policy Center. The article was first presented at the First Annual DMEF Educators’ Conference last September in Washing- ton, DC. F. ROBERT DWYER ABSTRACT Customer lifetime value (LTV) is an important construct in designing and budgeting for customer acquisition programs and a number of other decision areas. This article adapts a simple taxonomy of buyer-seller relationships to distinguish basic approaches for LTV estimation. © 1997 John Wiley Sons, Inc. and Direct Marketing Educational Foundation, Inc. CCC 0892-0591/97/040006-08 6 JOURNAL OF DIRECT MARKETING VOLUME 11 NUMBER 4 FALL 1997 BACKGROUND tants. They seem reluctant to reveal their proprietary models and know-how-or The “customer franchise” has been a key concept lack thereof (cf., [5]). in marketing for decades. Levitt’s classic article from b. The Direct Marketing Association’sMan- 1960 (9), challenged firms to “buy customers,” and