Customer Lifetime Value

Over-Values Current Customers at the Expense of Potential Customers

The biggest problem with how many CLV models are actually used is that they tend to deny the very idea that marketing works (i.e., that marketing will change customer behavior). Low-value customers can be turned into high-value customers by effective marketing. Many CLV models use incorrect mathematics in that they do not take account of the value of a far greater number of middle-value customers, over-prioritizing a smaller number of high value customers. Additionally, these high-value customers may be saturated (i.e., not have the ability to buy any more coffee or insurance), may be the most expensive group to serve, and may be the most expensive group to reach by communication. The use of survey data is a viable way to collect information on potential customers.