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Cookbook Modeling Data for Marketing_9

Tham khảo tài liệu 'cookbook modeling data for marketing_9', khoa học xã hội, kinh tế chính trị phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | Page 282 What is lifetime value Lifetime value is the expected value of a prospect or customer over a specified period of time measured in today s dollars. Lifetime value is measured in various ways depending on the industry but basically represents future revenues less overhead and expenses. This valuation allows companies to allocate resources based on customer value or potential customer value. Historically marketing strategies were driven by the financial benefits of a single campaign. Customer profitability was optimized by the net profits of the initial sale. But with the increased cost of acquiring customers and the expansion of products and services to existing customers companies are expanding their marketing strategies to consider the lifetime value of a potential customer. Lifetime value measurements on a customer portfolio can quantify the long-term financial health of a company or business. In the following sidebar William Burns Adjunct Professor of Business Administration at San Diego State University explains the holistic importance of the lifetime value measure. Uses of Lifetime Value Lifetime value measurements are useful for both acquiring customers and managing customer relationships. For new customer acquisition the increased expected value allows companies to increase marketing expenditures. This can broaden the universe of profitable prospects. Later on in this chapter I will show how this is carried out in our life insurance case study. For customer relationship management the uses of a lifetime value measurement are numerous. Once an LTV is assigned to each customer the customer database can be segmented for a variety of purposes. In many cases the 80 20 rule applies that is 20 of the customer base is generating 80 of the profits. Armed with this information your company is able to take actions or avoid an action based on the long-term benefit to the company. Marketing programs can be tailored to different levels of profitability. For .