Customer Lifetime Value with Dr. V. Kumar
VALUING YOUR CUSTOMERS
Defining Customer Valuation Theory
A mechanism to measure the future value of each customer that is based on (1) their direct economic value contribution, (2) the depth of the direct economic value contribution, and (3) the breadth of the indirect economic value contribution; by accounting for volatility and vulnerability of customer cash flows (Kumar (2018), "A Theory of Customer Valuation: Concepts, Metrics, Strategy, and Implementation," Journal of Marketing).
Based on the well-tested propositions that transaction behavior, marketing variables, demographic variables, and economic and environmental factors all significantly influence future customer profitability, CVT stands as an overarching, marketing-specific theory that aims to measure the future value of each customer. This valuation is based on the following key components:
Key Components of CVT
The above-mentioned CLV, CRV, CIV, and CKV metrics can be viewed on how customers perceive brands. In this regard, the Customer Brand Value (CBV) metric measures the value that the customer attaches to the brand as a result of all the marketing and communication messages delivered via various media. In other words, the CBV is a multi-dimensional composite metric that measures the customer’s brand knowledge, brand attitude, brand behavior intention, and brand behavior. It enables companies to devise appropriate strategies depending on where the problem exists – awareness, trust, or loyalty.
Kumar, V., (2018) "A Theory of Customer Valuation: Concepts, Metrics, Strategy, and Implementation," Journal of Marketing, forthcoming.