As marketing maturity has grown over time, corporations increasingly realize the value of having a 360-degree view of their customers. Traditionally, acquisition, cross-sell/up sell and retention programs have been handled by different groups within a firm.

These groups operate largely independently of one another, and the end result is often suboptimal. The organization stands to gain by focusing on prospects that will stay loyal longer and avoid the ones who are fickle or risky to serve. Similarly, it is better to focus the retention efforts and incentives on customers who are likely to buy more in the future. Therefore, organizations need to understand the lifetime value of their customers. Wikipedia says, “In marketing, customer lifetime value is the net present value of the cash flows attributed to the relationship with a customer.”   In a perfect world, an organization would want to establish a CLTV measure that accounts for the customers’ expected tenure, all likely future purchases (including cross-sell and up sell), the costs of servicing the customer (including product costs), customer service costs and losses in the event of likely default. And this CLTV measure would be available to everybody in the organization, who can then bake it into their decisions about the customer. In this scenario, even the customer service agents’ strategy for handling customer complaints/queries is driven by the CLTV measure.

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