Customer Lifetime Social Value (CLSV)

Elie  Ofek; Barak  Libai; Eitan  Muller

Background Note | HBS Case Collection | January 2018

Customer Lifetime Social Value (CLSV)

by Elie Ofek, Barak Libai and Eitan Muller

Abstract

One of the hallmarks of the digital revolution is the rise of the socially connected consumer. Concomitantly, the ability of companies to affect and measure the social interactions among customers has grown tremendously. Consequently, in assessing the full value of each customer to the firm it is no longer sufficient to only consider a customer’s worth in terms of the discounted cash flows he or she provides through direct payments, it is also critical to incorporate the indirect value generated through the customer’s social influence. In this note we develop a framework for measuring and quantifying the social value that a customer generates. We derive a simple expression for Customer Social Value (CSV) and show how to combine it with the commonly used expression for Customer Lifetime Value (CLV). The combined entity is termed Customer Lifetime Social Value (CLSV). The note uses concrete examples to illustrate the main ideas and explores a host of issues related to how customers create value for the firm through their social interactions, such as the duration of social influence, reduction in acquisition costs, segmentation implications, relevance for influencer marketing programs, and connection to firm-level valuation.

Keywords: customer lifetime value; Customer Management; social contagion; word of mouth; Customer Engagement; Customer Value and Value Chain; Measurement and Metrics; Customer Relationship Management;

Language: English

Format: Print

24 pages

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Citation:

Ofek, Elie, Barak Libai, and Eitan Muller. "Customer Lifetime Social Value (CLSV)." Harvard Business School Background Note 518-077, January 2018.

The brand management of places, such as countries, cities and regions, has received increasing attention in recent years. The associations, impressions and reputations that people have of a certain place can have a big impact in a number of areas – from tourism, to exports, to drawing talent, to securing foreign investment, to public diplomacy, and to political leadership. Consequently, a number of stakeholders may attempt to influence the perceptions that people have about a place in a way that is conducive to their goals. This background note lays the ground for instructors to expose students to the concept of a place brand, allow examining the ways in which it may be influenced, and examine the motivations of the various actors. The note provides ample examples of countries and cities that have actively tried to shape their brand identity and further exposes students to recent trends and vehicles (such as social media) relevant for the branding of places. The note raises a set of issues on this topic that can serve as the basis for a rich classroom discussion.

In 2018, Mustafa Koita, Founder and CEO of Dubai-based organic milk company Koita has to decide whether or not to pursue an investment from a potential competitor who is coming into his local market.

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Customer Lifetime Social Value (CLSV)

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