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On the customer lifetime value: a mathematical perspective

Author

Listed:
  • R. Ferrentino

    (University of Salerno)

  • M. T. Cuomo

    (University of Salerno)

  • C. Boniello

    (University of Salerno)

Abstract

The customer lifetime value (CLV) is an important concept increasingly considered in the field of general marketing and in the management of firms, of organizations to increase the captured profitability. It represents the total value that a customer produces during his or her lifetime, or better represents the measure of the potential profit generating by a customer. The companies use the customer lifetime value to segment customers, analyze probability of churn, allocate resources or formulate strategies and, therefore, they increasingly derive revenue from the creation and from sustenance of long-term relationships with their customers. For this reason, the customer lifetime value is increasingly considered a touchstone for the management of customer relationships. In this article, the authors deepen the concept and use of customer lifetime value and present some mathematical models for its determination. There is many models for this purpose but most of them are theoretic, complex and not applicable. Though not exhaustive, the major contribution of this paper is that it provides a general mathematical formulation to estimate the CLV and that it has a context less specific compared to papers, present in literature, on the customer lifetime.

Suggested Citation

  • R. Ferrentino & M. T. Cuomo & C. Boniello, 2016. "On the customer lifetime value: a mathematical perspective," Computational Management Science, Springer, vol. 13(4), pages 521-539, October.
    • Handle: RePEc:spr:comgts:v:13:y:2016:i:4:d:10.1007_s10287-016-0266-1
    DOI: 10.1007/s10287-016-0266-1
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    References listed on IDEAS

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    Cited by:

    1. Kati Stormi & Anni Lindholm & Teemu Laine & Tuomas Korhonen, 2020. "RFM customer analysis for product-oriented services and service business development: an interventionist case study of two machinery manufacturers," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(3), pages 623-653, September.
    2. R. Ferrentino & C. Boniello, 2020. "Customer satisfaction: a mathematical framework for its analysis and its measurement," Computational Management Science, Springer, vol. 17(1), pages 23-45, January.
    3. Mahsa Samsami & Ralf Wagner, 2021. "Investment Decisions with Endogeneity: A Dirichlet Tree Analysis," JRFM, MDPI, vol. 14(7), pages 1-19, July.
    4. Carlos Lamela-Orcasitas & Jesús García-Madariaga, 2023. "How to really quantify the economic value of customer information in corporate databases," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-13, December.
    5. Kessara Kanchanapoom & Jongsawas Chongwatpol, 2023. "Integrated customer lifetime value (CLV) and customer migration model to improve customer segmentation," Journal of Marketing Analytics, Palgrave Macmillan, vol. 11(2), pages 172-185, June.

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