Customer lifetime value research in marketing: A review and future directions

As we go through the information revolution, new marketingareas and issues are emerging that warrant in-depth research.New problems present themselves to investigation and old prob-lems can be analyzed in better ways due to the availability ofbetter data. Customer lifetime value (CLV) analysis is one sucharea in marketing that benefits from this new development.The notion of lifetime value of a customer has been well acceptedby both researchers and business practitioners. It is normally be-lieved that long-lifetime customers are more profitable to a firm.Reichheld and Teal (1996) attributed the increase in profits fromloyal customers to the price premium paid by loyal customers, theadded profits from sales through referrals, profit from cost savingsobtained by serving an old customer, and revenue growth from aloyal customer due to increase in sales to that customer. These canbe considered as summary of the commonly held reasons for in-crease in profitability from long-lifetime customers.