The Customer Lifetime Value Concept And Its Contribution To Corporate Valuation
AbstractThe shareholder value and the customer lifetime value approach are conceptually and methodically analogous. Both concepts calculate the value of a particular decision unit by discounting the forecasted net cash flows by the risk-adjusted cost of capital. However, virtually no scholarly attention has been devoted to the question if any of the components of the shareholder value could be determined in a more marketoriented way using individual customer lifetime values. Therefore, the main objective of this paper is to systematically explore the contribution of both concepts to the field of corporate valuation. At first we present a comprehensive calculation method for estimating both the individual lifetime value of a customer and the customer equity. After a critical examination of the shareholder value concept, a synthesis of both value approaches allowing for a disaggregated and more realistic corporate valuation will be presented.
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Bibliographic InfoPaper provided by EconWPA in its series Microeconomics with number 0402006.
Date of creation: 04 Feb 2004
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Customer Lifetime Value; Shareholder Value; Corporate Valuation;
Find related papers by JEL classification:
- D20 - Microeconomics - - Production and Organizations - - - General
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Cahiers de recherche
08-01, HEC Montréal, Institut d'économie appliquée.
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