Background Note | HBS Case Collection | July 2010 (Revised August 2011)

Marketing Analysis Toolkit: Customer Lifetime Value Analysis

by Thomas J. Steenburgh and Jill Avery

Abstract

Customers are increasingly being viewed as assets that bring value to the firm. Customer lifetime value is a metric that allows managers to understand the overall value of their customer base and relate it to three customer strategies firms employ: asset acquisition—attracting new customers to the firm; asset maximization—maximizing the value the firm extracts from each customer; and asset retention—retaining existing customers for the long-term. The note gives students a foundation for analyzing marketing cases, as well as providing an analytical structure and process for completing a marketing plan. The note is accompanied by a free Excel worksheet that contains sample problems, prebuilt Excel models to calculate customer lifetime value, and charts and graphs that help visualize the results.

Keywords: Customer Focus and Relationships; Customer Value and Value Chain; Management Analysis, Tools, and Techniques; Marketing Strategy; Measurement and Metrics; Strategic Planning; Value;

Citation:

Steenburgh, Thomas J., and Jill Avery. "Marketing Analysis Toolkit: Customer Lifetime Value Analysis." Harvard Business School Background Note 511-029, July 2010. (Revised August 2011.)