Customer Lifetime Value, Customer Profitability, and the Treatment of Acquisition Spending

摘要

We observe inconsistencies in the use of two of the most important terms in interactive marketing: customer lifetime value and customer profitability. The major purpose of this article is to create and clarify differences between these two terms by offering concise definitions for both. Our definition of customer lifetime value connects the word value in customer lifetime value to the word value in "present value" and "valuation" as used in finance theory. Our definition of customer profitability connects the word profitability in customer profitability to the concept of accounting profitability. The differences between present value and accounting profit are well understood in both finance and accounting. We propose the same distinctions be applied to customer lifetime value and customer profitability. The usefulness of our definitions will be demonstrated by considering the treatment of acquisition spending under both constructs.