Based on the chapters from A South Asian Perspective by Philip Kotler Learn how to maximize the customer value, Customer lifetime value and how to measure it.

1. Maximizing Customer
Lifetime Value

2. Marketing is the art of
attracting and keeping
profitable customers

3. Interesting numbers:
80 Cr. would be top 20
profitable customers
They may contribute to up
300 Cr
But the least 10 profitable
customers causes up to
100 Cr loss.
The implication being
company could profit
“firing” least profitable
customers.
Out of 100 customers.,
If company makes a profit of 100 Cr

4. Profitable Customer
Customer lifetime revenue stream > Company lifetime cost stream

5. C1 C2 C3
P1 + + + High profitable
product
P2 + Profitable
product
P3
- -
Unprofitable
product
P4
-
Highly
unprofitable
product
High profit
customer
Mixed-bag
Customer
Losing Customer
P – Product C-Customer

6. Customer Profit Analysis
(CPA) is best conducted
with activity-based
costing (ABC) With ABC, the costs includes
not only the making and
delivering costs, but all the
company’s resources that go
into serving the customer
Both variable and overhead
costs are back
to the customer
Companies not
measuring their profit
right are likely to
misallocate resources

7. Long-term customer profitability
is captured in
Customer Lifetime Value (CLV)
CLV helps formulate framework
for planning investments and
adopt long-term perspectives

8. Long-term customer profitability
is captured in
Customer Lifetime Value (CLV)
CLV helps formulate framework
for planning investments and
adopt long-term perspectives
𝐶𝐿𝑉 =
𝑡=0
𝑇
𝑝 𝑡 − 𝑐 𝑡 ∗ 𝑟(𝑇)
(1 + 𝑖) 𝑡 − AC
p (t) -- price paid at time t by customer
c (t) -- cost of servicing the customer
r ( t) -- probability that customer still buys the
product
AC -- acquisition cost
T -- time horizon for the estimate
i -- discount rate
-

9. Long-term customer profitability
is captured in
Customer Lifetime Value (CLV)
CLV helps formulate framework
for planning investments and
adopt long-term perspectives
𝐶𝐿𝑉 =
𝑡=0
𝑇
𝑝 𝑡 − 𝑐 𝑡 ∗ 𝑟(𝑇)
(1 + 𝑖) 𝑡 − AC
p (t) -- price paid at time t by customer
c (t) -- cost of servicing the customer
r ( t) -- probability that customer still buys the
product
AC -- acquisition cost
T -- time horizon for the estimate
i -- discount rate
-

10. Long-term customer profitability
is captured in
Customer Lifetime Value (CLV)
CLV helps formulate framework
for planning investments and
adopt long-term perspectives
𝐶𝐿𝑉 =
𝑡=0
𝑇
𝑝 𝑡 − 𝑐 𝑡 ∗ 𝑟(𝑇)
(1 + 𝑖) 𝑡 − AC
p (t) -- price paid at time t by customer
c (t) -- cost of servicing the customer
r ( t) -- probability that customer still buys the
product
AC -- acquisition cost
T -- time horizon for the estimate
i -- discount rate
-
The key decision is the time frame for estimating CLV
Typically, 3-5 years.

11. Special thanks
• https://www.flickr.com/photos/kimberlynmerrill/
• https://www.flickr.com/photos/griddlecakes/

12. Thank you!

13. Created by :
Ashwin Sasikumar
Govt. Model Engineering College, Kochi
Prof. Sameer Mathur
IIM Lucknow
www.IIMinternship.com
During an internship under :