8/2/2021

Ekta Srivastava
ektasrivastava@iimk.ac.in
FC-08, Phase V, IIM Kozhikode Campus

To be used only for instruction purpose at IIMK

 Key priority for all marketers- Monitor, Measure and Maximize CLTV

 Secret number used by most of the businesses to measure the potential financial
value of their customers.

 Your CLTV score can determine the prices you pay, the products and ads you see
and the perks you receive.

“There’s no free lunch, The more profitable you are, the better service you will
get.”

To be used only for instruction purpose at IIMK

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 The scores are just a high-tech version of what shopkeepers have done for
generations—make judgments on a customer’s value based on how they look or
behave.

To be used only for instruction purpose at IIMK

 Grow business profitably by acquiring, retaining and developing the right

customers

To be used only for instruction purpose at IIMK

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 Customer Profitability
 Customer Experience

 Thus, customers can be categorized into- Star customers, Vulnerable customers,

Free riders and Lost causes

 Challenge- Strike a balance between two sides of customer value

 How many customers fall into each category?

To be used only for instruction purpose at IIMK

 To distinguish high-value customers from low-value customers

 “Present value of all future streams of profits that an individual customer

generates over the life of his or her business with the firm.”

 CLV is based on
 Profits (contribution), not revenue
 Long-term (3-5 years)

 2 Pieces of information
 Annual Profit per customer
 Customer retention pattern

To be used only for instruction purpose at IIMK

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 Discounted cash flow?

 Individual customer level

 Possibility of customer defecting

To be used only for instruction purpose at IIMK

 Establishing customer acquisition cost limits

 Segmenting the customer base (high and low profitability)

 Increasing customer retention can influence CLV

 Making investment decisions

To be used only for instruction purpose at IIMK