THE CUSTOMER LIFETIME VALUE CONCEPT AND ITS CONTRIBUTION TO CORPORATE VALUATION

Hans H.Bauer, Maik Hammerschmidt () and Matthias Braehler
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Hans H.Bauer: University of Mannheim
Matthias Braehler: Marketing Partner Consulting, Munich

Microeconomics from University Library of Munich, Germany

Abstract: The shareholder value and the customer lifetime value approach are conceptually and methodically analogous. Both concepts calculate the value of a particular decision unit by discounting the forecasted net cash flows by the risk-adjusted cost of capital. However, virtually no scholarly attention has been devoted to the question if any of the components of the shareholder value could be determined in a more marketoriented way using individual customer lifetime values. Therefore, the main objective of this paper is to systematically explore the contribution of both concepts to the field of corporate valuation. At first we present a comprehensive calculation method for estimating both the individual lifetime value of a customer and the customer equity. After a critical examination of the shareholder value concept, a synthesis of both value approaches allowing for a disaggregated and more realistic corporate valuation will be presented.

Keywords: Customer Lifetime Value; Shareholder Value; Corporate Valuation (search for similar items in EconPapers)
JEL-codes: D20 (search for similar items in EconPapers)
Date: 2004-02-04
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpmi:0402006

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