Customer Lifetime Value (CLV)

In the organization I work at, an academic library, we do not have knowledge of value of our customers. While we collect different statistics related to resources and services we provide, we rarely look into the statistics in term of cost, we didn’t perform customer break-even analysis either. In the past year, we started to look at cost per use for electronic resources and journals. However, most of the decision for whether to continue a resources or services is based on overall usage. If there is very low usage, we cancel the resources or services. As for whether utilizing CLV could be beneficial to my organization, I’m not too sure as some of the actions need to be taken to implement CLV may not be flexible for us. For example, the mission of our organization is to serve everyone on our campus, it will be difficult for us to identify a segment of users who rarely use our resources and services and firing them. Besides, since we don’t charge for our services explicitly, rewarding customers with discount vouchers or preferential services may not be possible.

Practical issues of implementing CLV includes gathering of data related to customer activities. As mentioned by Ofek, response rate may not be available directly. Also, the firm may not have knowledge of the exact size of each segment they serve. Besides, setting a reasonable expectation at the prospects stage can be challenging. If the firm creates expectations that are exceedingly high, customers may be easily acquired but will not be satisfied or retained. This results in a negative impact on both per-period revenues and survival rates.