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Customer Lifetime Value: An application in the rural petroleum market

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Author Info

  • Brent A. Gloy

    (Purdue University, Department of Agricultural Economics, West Lafayette, Indiana)

  • Jay T. Akridge

    (Purdue University, Department of Agricultural Economics, West Lafayette, Indiana)

  • Paul V. Preckel

    (Purdue University, Department of Agricultural Economics, West Lafayette, Indiana)

Abstract

As building long term customer relationships becomes paramount to the success of agricultural input marketers, a question of focus is raised: Which customers should the firm attempt to build such relationships with? Customer Lifetime Value (CLV) is a concept some marketers have employed to better understand the long-term profit potential of specific customers or groups of customers. CLV is the net present value of the cash flow stream a customer is expected to generate for a firm over time. In this study, the CLV concept was employed to better understand the profitability of customers in the rural petroleum market. Findings suggest that customers in this market vary dramatically in the level of profits they generate for a firm. In addition, customer retention is important in this market with small reductions in customer retention rates leading to large reductions in CLV. A framework and modeling approach is also developed that marketers in other agribusiness industries may find useful as they attempt to measure and use customer lifetime value. © 1997 John Wiley & Sons, Inc.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

Volume (Year): 13 (1997)
Issue (Month): 3 ()
Pages: 335-347

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Handle: RePEc:wly:agribz:v:13:y:1997:i:3:p:335-347

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Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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Cited by:
  1. Gunderson, Michael A. & Gloy, Brent A. & LaDue, Eddy L., 2005. "Pricing Agricultural Loans to Account for Long-Term Default Risk," Proceedings: 2005 Agricultural and Rural Finance Markets in Transition,October 3-4, 2005; Minneapolis, Minnesota 132750, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
  2. Gloy, Brent A. & Akridge, Jay T., 1999. "Segmenting The Commercial Producer Marketplace For Agricultural Inputs," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 2(02).
  3. Martens, Bobby J. & Akridge, Jay T., 2006. "Customer Relationship Management at Farm Credit Services of Mid-America: Working towards a SingleView," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 9(03).
  4. D. F. Benoit & D. Van Den Poel, 2009. "Benefits of Quantile Regression for the Analysis of Customer Lifetime Value in a Contractual Setting: An Application in Financial Services," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/551, Ghent University, Faculty of Economics and Business Administration.

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