Investigating Two Customer Lifetime Value Models from Segmentation Perspective

Abstract

Customer lifetime value has been a topic of interest for some years upon which plenty of academics and marketing managers have been dwelling. The topic plays a key role in customer relationship management and has been implemented in variety of sectors. The main goal of customer lifetime value is to specify the importance level of each customer for a company. Such questions as what sort of marketing strategies should be preferred for which customers, how much investments should be made for them and which marketing campaigns should be followed can all be determined by calculating lifetime value of customers. Many researchers have proposed different types of models for calculating customer lifetime value. Yet, the related literature lacks of comparative research on assessing the existing models, especially within the scope of segmentation. This paper aims at providing a classification for the current models in the literature based on their basic characteristics and making a comparison between two representative models from different classes using the same database. An evaluation from segmentation perspective was done and the results indicated that the model that represented the future-past customer behaviour model class was found to be superior than its peer using the same database and variables.