Linking customer lifetime value to business value, powerful techniques for both executives and investors.

"Gupta and Lehmann have brilliantly brought together the customer and financial views of marketing. Astonishingly, many companies struggle to recall that cash comes from customers and that marketing is the sourcing and harvesting of that cash. Gupta and Lehmann provide the theory and practice for marketers and CFOs alike. Bravo!" - Tim Ambler, London Business School and author, "Marketing and the Bottom Line, Second Edition". "This book proves the adage that nothing is as practical as a good theory. The concept of lifetime value of a customer is presented in a straightforward and very practical way that will be extremely useful to marketers who are charged with improving financial accountability and managing ROI. It gives the reader enough information to get started with readily available data to understand how to think about and how to take action on customer management issues. The notion that it's better to be 'vaguely right, than precisely wrong' is just the right thing for companies that know they need to move on these issues but are struggling to get results." "I strongly recommend this book for marketers who want to get more effective at customer management.;The methods introduced in this book are important building blocks for a long-term testing and learning process to improve business performance." - Gordon Wyner, Executive Vice President, North American Strategy, Millward Brown, Inc. Chair, Executive Committee, Marketing Science Institute. "Gupta and Lehmann have written a rigorous, yet practical, guide to a complex and important area of timely importance to all senior executives; namely, how to manage customers profitably. This book shows effectively that the responsibility for managing customers is a cross-enterprise responsibility." - Anil Menon, Vice President, IBM Marketing Strategy and Worldwide Marketing Management. "For all those managers discussing how they would use client lifetime value... if they only had the information... this book answers that question and more. The text is thoughtful and explicit on how you can actually produce an effective valuation - and without all the detailed information that has traditionally been required. The authors deliver a researched formula and methodology and also demonstrate how best to manage this information and relevant analyses for profitable growth with improved new metrics.;And, they provide practical examples and case studies for decision-making using this new information. "Managing Customers as Investments" offers the roadmap and toolkit to shorten the trip to greater customer management insight." - Cathy F Burrows, Director, Enterprise Information & Customer Management Support, RBC Centura Bank. ""Managing Customers as Investments" provides a comprehensive, accessible, and practical guide to understanding and managing customers in today's complex marketing environment. It offers managers in-depth insight into calculating customer lifetime value (CLV) and using CLV to improve a company's bottom line. Furthermore, it provides practical tools such as the "two sides of customer value" framework that managers can actually use to identify priority customers and a step-by-step approach to what it takes to become a customer-centric organization." - John E. Forsyth, PartnerMcKinsey & Company. It's more important than ever for companies to objectively assess the value of their customers. But conventional measures of "customer lifetime value" haven't been linked to overall business value and haven't been useful to senior managers.;"Managing Customers as Investments" overcomes both shortcomings. Through practical examples and case studies, you'll learn a rigorous yet simple approach to estimating the lifetime value of your customers - and how you can use that information to make better tactical and strategic decisions. You'll learn how customer value calculations impact customer acquisition, service, retention, and segmentation - as well as strategic M&A and alliance decisions. Whether you're a CxO, line-of-business manager, marketer, analyst, or investor, 'Managing Customers as Investments" will help you focus your resources where they'll deliver maximum value.;Key takeaways include: customers are assets; how to calculate the value of customers in a simple way; how the value of customers provides the basis for marketing strategy and planning; the importance of balancing the value of the customer to the firm with the value the firm provides to the customer; how to use the value of the customer as a basis for firm valuation and M&A decisions; the implications for organization and incentive structure and the limitations of product and brand management; how to link customer value to business value; practical techniques for CxOs, line-of-business managers, marketers, financial analysts, and investors; how to make better decisions about marketing, partnerships, and organizational structure; and easy-to-use metrics and real-world case studies.

• Acknowledgments. 1. Customers Are Assets. Importance of Customers. The Gap Between Beliefs and Actions. Bridging the Gap. The Plan of the Book. Summary. 2. The Value of a Customer. Customer Lifetime Value. Creating Metrics That Matter. Data Requirements. Complexity. Illusion of Precision. A Simple Approach. How Reasonable Are Our Assumptions? Margin. Retention Rate. Time Horizon. Modifications and Extensions. Margin Growth. Improving Retention. Finite Time Horizon. Summary. 3. Customer-Based Strategy. Traditional Marketing Strategy. Value to the Firm vs. Value to the Customer. The Two Sides of Customer Value. Key Marketing Metrics. Traditional Metrics. Customer Metrics. Traditional vs. Customer-Based Strategy: A Case Study. Drivers of Customer Profitability. Customer Acquisition. Customer Margin. Customer Retention. Summary. 4. Customer-Based Valuation. Customer Acquisition via Firm Acquisition. AT&T's Acquisition of TCI and MediaOne. Acquisitions in the European Utility Industry. From Customer Value to Firm Value. The Rise and Fall of Internet Gurus. The Eyeballs Have It-or Do They? Customer-Based Valuation. Drivers of Customer and Firm Value. Impact of Marketing Actions on Firm Value. Impact of Marketing and Financial Instruments on Firm Value. Valuing Netflix. Summary. 5. Customer-Based Planning. Step 1: Customer Objectives. The Case of Evergreen Trust. The Case of Lipitor. Step 2: Understanding Sources of Value to Customers. Economic Value. Functional Value. Psychological Value. Step 3: Designing Marketing Programs. Marketing Mix-the 4 Ps. Managing Customer Touchpoints. Loyalty Programs. Database Marketing. Step 4: Customer Metrics for Assessing Effectiveness of Programs. Choosing and Using the Right Metrics. Summary. 6. Customer-Based Organization. Organizational Structure. The Case of L.L. Bean. Incentive Systems. Employee Selection and Training. Customer-Based Costing. New Metrics. Who Needs to Do What: Tasks for Various Parties. Harrah's Entertainment, Inc.: A Winning Hand in a Dicey Business. Common Mistakes in Implementing a Customer-Based Strategy. Concluding Remarks. Appendix A: Estimating Customer Lifetime Value (CLV). Appendix B: Impact of Retention on Share and Profits. Appendix C: Value of Customer Base. Endnotes. Index .