Saturday, May 29, 2010

LTV, LC and RFM connection

LTV is a measurement of net financial value contributed by a customer, and Lift measures are like a "time slice" of the overall LTV curve expressed over time.

LifeCycles are a management framework for programs designed to affect LTV, and models using Recency, Frequency, and Monetary are used to look at a "time slice" of the LifeCycle.

LTV can generally be increased in two ways: by creating more value during the existing LifeCycle, or by extending the LifeCycle. Marketing (including Product) is typically used when doing the first, Service and Operations -customer experience and
satisfaction -are largely what can affect the second.

So it is completely appropriate to establish a unified approach to the measurement of customer programs intended to increase the value of a customer across all these disciplines, in order to ensure the allocation of scarce resources to highest and best use.