Customer Lifetime Value: Dimensionalities and Conceptual Connections

Markets, Globalization & Development Review Volume 10 Number 1 Article 4 2025 Customer Lifetime Value: Dimensionalities and Conceptual Connections Sharmistha Bhattacharyya Mrinmoy Kumar Sarma Follow this and additional works at: https://digitalcommons.uri.edu/mgdr Part of the Advertising and Promotion Management Commons, Anthropology Commons, Business Analytics Commons, Economics Commons, Marketing Commons, Other Business Commons, and the Sociology Commons Recommended Citation Bhattacharyya, Sharmistha and Sarma, Mrinmoy Kumar (2025) "Customer Lifetime Value: Dimensionalities and Conceptual Connections," Markets, Globalization & Development Review: Vol. 10: No. 1, Article 4. DOI: 10.23860/MGDR-2025-10-01-04 Available at: https://digitalcommons.uri.edu/mgdr/vol10/iss1/4 This Dialogue is brought to you by the University of Rhode Island. It has been accepted for inclusion in Markets, Globalization & Development Review by an authorized editor of DigitalCommons@URI. For more information, please contact . For permission to reuse copyrighted content, contact the author directly. Customer Lifetime Value: Dimensionalities and Conceptual Connections This dialogue is available in Markets, Globalization & Development Review: https://digitalcommons.uri.edu/mgdr/ vol10/iss1/4 Bhattacharyya and Sarma: Customer Lifetime Value - Review Customer Lifetime Value: Dimensionalities and Conceptual Connections Introduction Customer valuation is an important aspect of Customer Relationship Management (CRM) (Kumar and Reinartz 2006). Customer Lifetime Value (CLV) is a tool that helps a firm estimate the future customer value. Literature suggests that CLV has been studied under various names: “Lifetime Value, Customer Equity, Net Present Value, Customer Profitability, and Customer Value” (Estrella-Ramon et al. 2013). Irrespective of the nomenclature, Customer Lifetime Value (CLV) examines the longterm value of an individual customer for the company (Wu et al. 2005). According to Dwyer (1997), CLV is the current value of the perceived advantages (e.g., gross margin) less the liabilities (e.g., direct cost of servicing and communicating) from customers. Kumar, Ramani, and Bohling (2004) explain the concept as the sum of discounted cash flows that a customer contributes during his/her lifetime. Singh and Jain (2013) recommend the use of Prospective Lifetime Value (PLV) instead. In their definition of PLV, the concept also includes the cost of customer acquisition. In general, CLV is a metric that helps a company in knowing how much revenue a customer shall be able to generate over his/her lifetime horizon. Once CLV is estimated, companies can locate potential customers, reduce costs of acquisition by targeting segments of customers, and arrange a systematic structure of Customer Relationship Management or CRM (Kashprova 2020). The aim of this Dialogue contribution, a result of the ongoing exchanges between MGDR editors/reviewers and the authors, is to explicate the dimensionalities and conceptual connections of Customer Lifetime Value (CLV) and cognate concepts in the literature. Building such connections sets the stage for more nuanced work – conceptual and empirical – on CLV. The concept of Customer Lifetime Value (CLV) is gaining wide acceptance in many business settings where the focus is on interacting with customers throughout the duration of customer relationships (Singh and Jain 2013). And in order to properly estimate the value, it is very important to know the factors that exert an impact on the value that a customer can generate towards the business (Qi et al. 2012; Singh and Jain 2013). The value of a customer over his/her lifetime can be influenced by both financial and non-financial factors. According to Kaul (2017), non-financial values like customer satisfaction and repeat purchase probabilities may ultimately Published by DigitalCommons@URI, 2025 1 Markets, Globalization & Development Review, Vol. 10 [2025], No. 1, Art. 4 help retailers in determining CLV for a long-term benefit. In the section below, we discuss the main factors that can influence the value that is generated by a customer for the business. The discussion below also helps us in identifying the variables for an empirical study that is not included in this commentary but is presently under review. Customer Satisfaction and Customer Lifetime Value The concept of customer satisfaction occupies a core position in marketing literature. Oliver (1997, p.13) has defined customer satisfaction as “the consumer’s fulfilment response.” According to him, “it is the judgement that any product or service feature, or the product or service itself, provided a pleasurable level of consumption related fulfilment, including levels of under or over-fulfilment” (p. 13). In the words of Kotler (2000, p.36), satisfaction is “a feeling of pleasure or disappointment which results from comparing a product’s perceived performance or outcome against his/her expectations.” One of the key elements of CLV is customer retention. It is only when a customer is retained long into the business that his lifetime value turns out to be profitable. Kotler (1994, p.20) sums up his research stating that “the key to customer retention is customer satisfaction.” Oliver et al. (1992) conclude that satisfaction is an antecedent of quality judgement and then a foundation for building loyalty. Prior researchers have found significant association between customer satisfaction and the different components of CLV – retention, longer lifetime durations, and revenue (Chen 2012; Boltan 1998; Gustafsson et al. 2005). In a study by Hallowell (1996) to determine the relation between customer satisfaction, loyalty, and profitability in a retail banking context, it was found that customer satisfaction is inherently related to customer retention. Further, Henning et al. (1997) develop a conceptual model of the satisfaction-retention link in their study that critically reassesses the effect of satisfaction and relationship quality on retention. Zeithaml et al. (1996) indicate that it is those customers who are highly satisfied that make repeat purchases in the future. Kotler (1988) states that customer satisfaction is the best indicator of a customer’s future profits. A customer who is satisfied has a greater likelihood of repurchasing (Jacoby et al. 1978). Sivadas and Baker-Prewitt (2000) conclude that satisfaction influences the repurchase and recommendation behavior of customers. Satisfaction is also tied with customer retention in many studies (Mittal and Kamakura 2001). CLV estimation entails predicting customer’s future flow of revenues and customer’s retention rate. Kaul (2017) concludes that customer satisfaction has a straight relation with repeat purchase and customer retention, which is a basic consideration in CLV estimation. In another study by Dandis et al. (2022), designed to identify the factors that https://digitalcommons.uri.edu/mgdr/vol10 (...truncated)