Integrated customer lifetime value models to support marketing decisions in the complementary and alternative medicine industry

Abstract

PurposeCustomer lifetime value (CLV) is one of the key indicators to measure the success or health of an organization. How can an organization assess the organization's customers' lifetime value (LTV) and offer relevant strategies to retain prospective and profitable customers? This study offers an integrated view of different methods for calculating CLVs for both loyalty members and non-membership customers.Design/methodology/approachThis study outlines eleven methods for calculating CLV considering (1) the deterministic aspect of NPV (Net present value) models in both finite and infinite timespans, (2) the geometric pattern and (3) the probabilistic aspect of parameter estimates through simulation modeling along with (4) the migration models for including “the probability that customers will return in the future” as a key input for CLV calculation.FindingsThe CLV models are validated in the context of complementary and alternative medicine (CAM)in the healthcare industry. The results show that understanding CLV can help the organization develop strategies to retain valuable customers while maintaining profit margins.Originality/valueThe integrated CLV models provide an overview of the mathematical estimation of LTVs depending on the nature of the customers and the business circumstances and can be applied to other business settings.