The role of lifetime value in customer relationship management

This paper will address a topic common among customer relationship management (CRM) practitioners — the use of lifetime value (LTV) models, especially for customer marketing segmentation. It will draw comparisons between LTV and other common marketing/segmentation metrics and how these are used. It will also discuss some of the challenges facing the analyst who wishes to use LTV and how these might be overcome. Finally, it will illustrate how LTV-based segmentation can be incorporated into a comprehensive model that maximises yield from a finite marketing budget.