Analysis of customer lifetime value model: Literature review

The financial performance of a company is evaluated by two models in the marketing and sale phase of business cycle: tactically oriented customer profitability analysis model (CPA) and strategically oriented customer lifetime value model (CLTV). The article surveys the current literature which deals with both marketing and sales models with the emphasis on the strategic customer lifetime value model. Furthermore the article studies strengths and limitations of different models used to determine the customer lifetime value with the respect on their application on real data. The paper concludes that there is a significant amount of limitations of the fundamental model CLTV leading to a bias CLTV determination of a customer. Their neglect may lead to poor strategic management decisions about the resource allocation within the customer portfolio.