Open Access Article

Title: Innovation in marketing strategy: A customer lifetime value approach

Authors: Mehir Kumar Baidya; Bipasha Maity; Kamal Ghose

Addresses: Author address listing can be found in the "About the Authors" section at the end of the article.

Abstract: Purpose - Customers are the most important asset of a firm. Therefore, estimating and understanding of the economic value of customers is one of the important issues in devising smart marketing strategies. This research attempts to estimate the lifetime economic value of customer (LEVC) for the purpose of innovation in marketing strategy to ensure sustainable competitive advantage in markets. Method - A scientific research approach was initiated, that is, both induction and deductive research philosophies were taken into considered. Six primary and five secondary hypotheses were framed using insights from various sources like previous studies and inputs from managers. Longitudinal data on some active variables and on some attribute variables were gathered from a panel of 400 households in India. Thereafter, Multiplicative regression model (MRM) and Poisson regression model (PRM) were fitted to data to test all hypotheses. Finding - Results support all the hypotheses such as 'value proposition (VP) impact on both share-of-wallet (SOW) and frequency of buying (FOB) positively'. Furthermore, LEVC varies from one group of customer to another. Moreover, the distribution of EVC is highly skewed over groups of customer. In fact, 30 percent customer generates 70 percent EVC and 70 percent customer produces 30 percent EVC. Limitations - As far as limitations are concerned, the approach applied here is appropriate only when there is a meaningful difference exists among different groups of customer with respect to their economic value. Moreover, this work's approach is better suited to handle customer than products. Implications - Findings should assist managers to create and manage a balance portfolio of customer to ensure short-term financial gain from and long-term stability of all customer groups. On the other hand, findings should provide guidelines to researchers to do research in the area of economic value of customer more precisely. Originality - This research contributes to practice and research in marketing because it discloses some strategic levers of customer equity--the most important asset of a firm.

Keywords: Marketing strategy; customer life time value; economic value; decomposition; portfolio.

DOI: 10.1504/JBM.2019.141272

Journal of Business and Management, 2019 Vol.25 No.2, pp.71 - 97

Published online: 05 Sep 2024 *