| Firms are increasingly adopting a customer-centric approach to marketing, and in this context, customer lifetime value (CLV) becomes critical. This dissertation investigates some important issues arising in CLV analysis. It is divided into three main parts with each investigating specific issues.; The first part develops a continuous time Markov chain based framework that allows a more general method for estimating the total value of a firm's present and future customers (Integrated Customer Equity (ICE)). The framework is applied to link marketing actions to customer equity, derive useful insights into customer relationship management, use customer lifetime as a basis for market segmentation, and propose a way to use ICE to measure the value of a firm.; We find that the ICE of our focus firm is more than two and a half times the value of the present customers of the firm (Acquired Customer Equity (ACE)). Investment in customer retention gives the firm a better return than investment in customer acquisition.; The second part analyzes two different customer retention programs implemented by the firm. We investigate which program might be a more profitable method to retain customers. Our results show strong evidence that different types of customers self-select into different retention programs, and therefore it is better for firms to offer targeted customer retention programs.; The third part studies customer lifetime and interpurchase times simultaneously, explicitly accounting for the relationship between them. Our results show that when a customer is at a higher risk of leaving the firm, she is less likely to purchase from it. Overall, the results show strong evidence in support of modeling the two processes simultaneously. |
