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Customer Lifetime Value: An application in the rural petroleum market

Author

Listed:
  • 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.

Suggested Citation

  • Brent A. Gloy & Jay T. Akridge & Paul V. Preckel, 1997. "Customer Lifetime Value: An application in the rural petroleum market," Agribusiness, John Wiley & Sons, Ltd., vol. 13(3), pages 335-347.
    • Handle: RePEc:wly:agribz:v:13:y:1997:i:3:p:335-347
    DOI: 10.1002/(SICI)1520-6297(199705/06)13:3<335::AID-AGR7>3.0.CO;2-1
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    Cited by:

    1. Schwering, Dorothee Schulze & Hollenbeck, Anna & Krone, Saskia & Spiller, Achim & Lemken, Dominic, 2022. "Crop protection market segmentation: relationship between buyer segments and the use of digital sales channels," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 25(4), September.
    2. Oğuzhan Kivrak & Cüneyt Akar, 2020. "Effect of Social Media Interactions on CLV in Telecommunications," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 19(02), pages 447-468, March.
    3. Paul Andon & Jane Baxter & Graham Bradley, 2001. "Calculating the Economic Value of Customers to an Organisation," Australian Accounting Review, CPA Australia, vol. 11(23), pages 62-72, March.
    4. Gunderson, Michael A. & Gloy, Brent A. & LaDue, Eddy L., 2005. "Pricing Agricultural Loans to Account for Long-Term Default Risk," 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.
    5. Juozauskas Ernestas & Kiyak Deimena & Šneiderienė Agnė, 2022. "The Possibilities of Using Projective Planning in Creating and Presenting Value to the Consumer in the Catering Sector," Management Theory and Studies for Rural Business and Infrastructure Development, Sciendo, vol. 44(4), pages 421-434, December.
    6. 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.
    7. 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, vol. 9(3), pages 1-15.
    8. 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, vol. 2(2), pages 1-19.

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