A Customer Lifetime Value Framework for Customer Selection and Resource Allocation Strategy

The authors evaluate the usefulness of customer lifetime value (CLV) as a metric for customer selection and marketing resource allocation by developing a dynamic framework that enables managers to maintain or improve customer relationships proactively through marketing contacts across various channels and to maximize CLV simultaneously. The authors show that marketing contacts across various channels influence CLV nonlinearly. Customers who are selected on the basis of their lifetime value provide higher profits in future periods than do customers selected on the basis of several other customer-based metrics. The analyses suggest that there is potential for improved profits when managers design resource…