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The Customer Lifetime Value Concept And Its Contribution To Corporate Valuation

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Author Info

  • Hans H.Bauer

    (University of Mannheim)

  • Maik Hammerschmidt

    (University of Mannheim)

  • Matthias Braehler

    (Marketing Partner Consulting, Munich)

Abstract

The 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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File URL: http://128.118.178.162/eps/mic/papers/0402/0402006.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Microeconomics with number 0402006.

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Date of creation: 04 Feb 2004
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Handle: RePEc:wpa:wuwpmi:0402006

Note: Type of Document - pdf; prepared on WinXP; to print on HP;
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Web page: http://128.118.178.162

Related research

Keywords: Customer Lifetime Value; Shareholder Value; Corporate Valuation;

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References

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  1. Ruth N. Bolton, 1998. "A Dynamic Model of the Duration of the Customer's Relationship with a Continuous Service Provider: The Role of Satisfaction," Marketing Science, INFORMS, vol. 17(1), pages 45-65.
  2. Bayón, Tomás & Gutsche, Jens & Bauer, Hans, 2002. "Customer Equity Marketing:: Touching the Intangible," European Management Journal, Elsevier, vol. 20(3), pages 213-222, June.
  3. Hans H. Bauer & Maik Hammerschmidt & Matthias Staat, 2004. "Analyzing Product Efficiency – A Customer-Oriented Approach," Microeconomics 0402008, EconWPA.
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Cited by:
  1. Kleshchelski, Isaac & Vincent, Nicolas, 2009. "Market share and price rigidity," Journal of Monetary Economics, Elsevier, vol. 56(3), pages 344-352, April.
  2. Juha Karvanen & Ari Rantanen & Lasse Luoma, 2013. "Survey data and Bayesian analysis: a cost-efficient way to estimate customer equity," Papers 1304.5380, arXiv.org, revised May 2014.

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