1) Apply Customer Lifetime Value to Facilitate Managing Customer as Investments

“You can use it [Customer Lifetime Value] at the individual customer level to figure out what an individual customer or segment of customers is worth on a per head basis and then relate that to how much effort you spend to acquire and retain them. If a customer is going to generate discounted cash flow profits of $400 over their lifetime, you don’t want to spend $500 acquiring them. And yet, I think an awful lot of companies, because they have not done that relatively simple calculation, have overpaid for customers and either over- or underpaid on retention. If a customer’s worth $20,000 to you and you’re spending $10 a year to retain them, you’re probably not spending as much as you should.”

http://www4.gsb.columbia.edu/ideasatwork/feature/70195/Customer+Lifetime+Value

http://www.amazon.com/Managing-Customers-Investments-Strategic-Value/dp/0131428950

2) Expect and Manage Customer Lifetime Value “False Positives” and “False Negatives”

“Malthouse and Blattberg were stunned by the patterns of false positives and negatives that they observed. Across all the models and data sets, whether they predicted customers’ values from one to six years into the future, the patterns were remarkably consistent. So consistent, in fact, that Blattberg and Malthouse proposed two new, empirical rules.

They referred to the first insight as the 20-55 rule: of the actual top 20 percent of future customers, roughly 55 percent will be misclassified as poor or average customers, ...

They dubbed the other rule the 80-15 rule: of the actual bottom 80 percent of future customers, roughly 15 percent will be misclassified and will receive special treatment. ...

The ramifications of this work were clear. Roughly a quarter of all customers were misclassified, falsely positive or negative. A company that makes marketing decisions that are misguided one out of every four times could gain considerably by reconsidering its targets in a more sophisticated way. That is, if it survives long enough to do so.”

http://insight.kellogg.northwestern.edu/index.php/Kellogg/article/predicting_customer_lifetimevalue

4) Consider the Referral and Network Value of the Customer

http://www.hbs.edu/research/pdf/07-035.pdf

http://hbr.org/products/R0710J/R0710Jp4.pdf

5) Consider Investing also in Low-Value Customers

“Marketers often lavish attention on their best customers, but Stanford Graduate School of Business researchers James M. Lattin and V. Srinivasan suggest it may be more cost effective to increase their spending on clients who only occasionally use their products or services.”

http://www.gsb.stanford.edu/news/research/seenu_customers.html