Tool | 2013

Harvard Business Review's Go to Market Tools: Customer Lifetime Value

by Thomas Steenburgh and Jill Avery

Abstract

How much are your customers worth? Has your marketing budget been slashed? Need to figure out the best place to invest your time and effort to reach your growth target? HBR's Go to Market Tool helps calculate your customer's lifetime value, allowing you to prioritize your marketing and product development resources on the customers that will provide the biggest returns. This tool allows you to play around with the levers that determine a customer's lifetime value—providing insight into how to maximize the value each type of customer delivers to your company. The relationships a company has with its customers are one of its most valuable assets, and understanding the value of those customer relationships is key to managing them well over time. But not all customers are created equally, and figuring out how much value each customer adds to your bottom line allows you to be most efficient with your marketing and product development investment. Enter your own data into HBR's Customer Lifetime Value tool to figure out: (1) How much to spend to acquire a new customer, or retain an existing one, (2) What levers you could pull to increase a customer's lifetime value, and by how much, (3) Which customer segments you should target to maximize profits, (4) Which customer segments are dragging down your profitability, and (5) How to increase the value of the customers you already have. HBR's Customer Lifetime Value tool includes: a brief tutorial that walks you through the concepts and calculations; guidance for gathering your own data to plug into the tool; and a pre-designed, yet fully customizable PowerPoint presentation to share your results with your colleagues.

Keywords: marketing; Quantitative analysis; Tools; customer lifetime value; customer defection; CRM; customer relationship management; Marketing; Marketing Strategy; Customer Focus and Relationships;

Citation:

Steenburgh, Thomas, and Jill Avery. Harvard Business Review's Go to Market Tools: Customer Lifetime Value. Tool. Harvard Business Review Press, 2013. Electronic.