Customer Profitability Analyses and Customer Lifetime Value

Ashok Sridhar; Michael Corbey

doi:10.5117/mab.89.31335

Maandblad Voor Accountancy en Bedrijfseconomie 89(7/8): 265-273, doi: 10.5117/mab.89.31335

Customer Profitability Analyses and Customer Lifetime Value

Ashok Sridhar, Michael Corbey

Corresponding author: Ashok Sridhar ( ashok.sridhar@gmail.com )

This is an open access article distributed under the terms of the Creative Commons Attribution License (CC BY-NC-ND 4.0), which permits to copy and distribute the article for non-commercial purposes, provided that the article is not altered or modified and the original author and source are credited.

Citation: Sridhar A, Corbey M (2015) Customer Profitability Analyses and Customer Lifetime Value. Maandblad Voor Accountancy en Bedrijfseconomie 89(7/8): 265-273. https://doi.org/10.5117/mab.89.31335

Abstract

The main objective of this paper is to compare two key approaches in the !eld of Customer Accounting (CA), namely Customer Pro!tability Analysis (CPA) and Customer Lifetime Value (CLV). While CPA is a retrospective analysis of past accruals that represent the results of doing business with a customer over a certain, mostly single-period of time, CLV is a predictive measure of future customer-related cash "ows over a certain (multi-)period of time. This paper draws on the state-ofthe- art knowledge in the Customer Accounting (CA) literature to identify the impacts of CPA and CLV on managerial decision-making. It also offers recommendations as to the scenarios in which these metrics should be deployed in order to arrive at meaningful managerial decisions, and highlights their collective limitations.