"Gupta and Lehmann have brilliantly brought together the customer and financial views of marketing. Astonishingly, many companies struggle to recall that cash comes from customers and that marketing is the sourcing and harvesting of that cash. Gupta and Lehmann provide the theory and practice for marketers and CFOs alike. Bravo!"

"--Tim Ambler, London Business School and author, Marketing and the Bottom Line, Second Edition"

"This book proves the adage that nothing is as practical as a good theory. The concept of lifetime value of a customer is presented in a straightforward and very practical way that will be extremely useful to marketers who are charged with improving financial accountability and managing ROI. It gives the reader enough information to get started with readily available data to understand how to think about and how to take action on customer management issues. The notion that it' s better to be ' vaguely right, than precisely wrong' is just the right thing for companies that know they need to move on these issues but are struggling to get results. I strongly recommend this book for marketers who want to get more effective at customer management. The methods introduced in this book are important building blocks for a long-term testing and learning process to improve business performance."

"--Gordon Wyner, Executive Vice President, "

"North American Strategy, Millward Brown, Inc.""Chair, Executive Committee, Marketing Science Institute"

"Gupta and Lehmann have written a rigorous, yet practical, guide to a complex and important area of timely importance to all senior executives; namely, how to manage customers profitably. This book shows effectively that the responsibility for managing customers is a cross-enterprise responsibility."

"--Anil Menon, Vice President"

"IBM Marketing Strategy and Worldwide Marketing Management"

"For all those managers discussing how they would use client lifetime value...if they only had the information...this book answers that question and more. The text is thoughtful and explicit on how you can actually produce an effective valuation--and without all the detailed information that has traditionally been required. The authors deliver a researched formula and methodology and also demonstrate how best to manage this information and relevant analyses for profitable growth with improved new metrics. And they provide practical examples and case studies for decision-making using this new information. "Managing Customers as Investments" offers the roadmap and toolkit to shorten the trip to greater customer management insight."

"--Cathy F Burrows, Director, "

"Enterprise Information & Customer Management Support""RBC Centura Bank "

"Managing Customers as Investments" provides a comprehensive, accessible, and practical guide to understanding and managing customers in today' s complex marketing environment. It offers managers in-depth insight into calculating customer lifetime value (CLV) and using CLV to improve a company' s bottom line. Furthermore, it provides practical tools such as the "two sides of customer value" framework that managers can actually "use "to identify priority customers and a step-by-step approach to what it takes to become a customer-centric organization."

"--John E. Forsyth, Partner"

"McKinsey & Company"

It' s more important than ever for companies to objectively assess the value of their customers. But conventional measures of "customer lifetime value" haven' t been linked to overall business value and haven' t been useful to senior managers. Managing Customers as Investments overcomes both shortcomings.

Through practical examples and case studies, you' ll learn a rigorous yet simple approach to estimating the lifetime value of your customers--and how you can use that information to make better tactical and strategic decisions. You' ll learn how customer value calculations impact customer acquisition, service, retention, and segmentation--as well as strategic M&A and alliance decisions.

Whether you' re a CxO, line-of-business manager, marketer, analyst, or investor, Managing Customers as Investments will help you focus your resources where they' ll deliver maximum value.

Key takeaways include

Customers are assets

How to calculate the value of customers in a simple way

How the value of customers provides the basis for marketing strategy and planning

The importance of balancing the value of the customer to the firm with the value the firm provides to the customer

How to use the value of the customer as a basis for firm valuation and M&A decisions

The implications for organization and incentive structure and the limitations of product and brand management

How to link customer value to business value

Practical techniques for CxOs, line-of-business managers, marketers, financial analysts, and investors

How to make better decisions about marketing, partnerships, and organizational structure

Easy-to-usemetrics and real-world case studies

What your customers are really worth: crucial knowledge for better strategic and tactical decision-making

How can you find out, without endlessly complex modeling? And after you know, what should you do with that knowledge?

"Managing Customers as Investments" has the answers--and they may surprise you.

You' ll learn surprisingly simple ways to get reliable customer value information...and get it in a form you can use.

You' ll learn how to use it to measure your marketing effectiveness more accurately than ever before--and drive improvements throughout your entire customer relationship lifecycle.

You' ll learn how customer value can bring new clarity to decisions about M&A and firm valuation.

Everyone tells you to manage your business around customers. This book gives you the tools to do it.

(c) Copyright Pearson Education. All rights reserved.

SUNIL GUPTA is Meyer Feldberg Professor of Business at the Columbia Business School, Columbia University, New York. He has also taught at UCLA and the Harvard Business School; conducted seminars and consulted with companies worldwide; appeared on CNN, BBC, and PBS; and been quoted in publications, including The New York Times, The Financial Times, and The Washington Post.

Gupta's expertise is in marketing strategy, pricing, and customer management. He has published extensively on these topics. His research papers have won several awards. He serves on the editorial boards of six journals.

He is the cofounder and president of the EX Group, a strategic consulting group that specializes in customer management. He also served as an academic trustee of the Marketing Science Institute. He holds an MBA from Indian Institute of Management and a Ph.D. from Columbia University.

DONALD R. LEHMANN is George E. Warren Professor of Business at the Columbia Business School, Columbia University, New York. His research interests include modeling individual and group decision-making, empirical generalizations and meta-analysis, the introduction and adoption of new products and innovations, and measuring the value of marketing assets such as brands and customers. He has taught courses in marketing, management, and statistics at Columbia and has also taught at Cornell, Dartmouth, New York University, and the University of Pennsylvania.

Lehmann has published in and served on the editorial boards of several journals and was founding editor of Marketing Letters. His books include Market Research and Analysis, Analysis for Marketing Planning, Product Management, and Meta-Analysis in Marketing.

He served as executive director of the Marketing Science Institute and as president of the Association for Consumer Research. He is the recipient of many awards, including the 2000 Paul D. Converse award and the AMA McGraw Hill-Irwin distinguished marketing educator award. He holds an M.S.I.A. and Ph.D. from the Krannert School of Purdue University.

Gupta and Lehmann, along with Joel Steckel, are coauthors of Marketing Research.

© Copyright Pearson Education. All rights reserved.

Acknowledgments.

1. Customers Are Assets.

    Importance of Customers.

    The Gap Between Beliefs and Actions.

    Bridging the Gap.

    The Plan of the Book.

    Summary.

2. The Value of a Customer.

    Customer Lifetime Value.

    Creating Metrics That Matter.

      Data Requirements.

      Complexity.

      Illusion of Precision.

    A Simple Approach.

    How Reasonable Are Our Assumptions?

      Margin.

      Retention Rate.

      Time Horizon.

    Modifications and Extensions.

      Margin Growth.

      Improving Retention.

      Finite Time Horizon.

    Summary.

3. Customer-Based Strategy.

    Traditional Marketing Strategy.

    Value to the Firm vs. Value to the Customer.

      The Two Sides of Customer Value.

    Key Marketing Metrics.

      Traditional Metrics.

      Customer Metrics.

    Traditional vs. Customer-Based Strategy: A Case Study.

    Drivers of Customer Profitability.

      Customer Acquisition.

      Customer Margin.

      Customer Retention.

    Summary.

4. Customer-Based Valuation.

    Customer Acquisition via Firm Acquisition.

      ATandT’s Acquisition of TCI and MediaOne.

      Acquisitions in the European Utility Industry.

    From Customer Value to Firm Value.

      The Rise and Fall of Internet Gurus.

      The Eyeballs Have It–or Do They?

      Customer-Based Valuation.

    Drivers of Customer and Firm Value.

      Impact of Marketing Actions on Firm Value.

      Impact of Marketing and Financial Instruments on Firm Value.

    Valuing Netflix.

    Summary.

5. Customer-Based Planning.

    Step 1: Customer Objectives.

      The Case of Evergreen Trust.

      The Case of Lipitor.

    Step 2: Understanding Sources of Value to Customers.

      Economic Value.

      Functional Value.

      Psychological Value.

    Step 3: Designing Marketing Programs.

      Marketing Mix–the 4 Ps.

      Managing Customer Touchpoints.

      Loyalty Programs.

      Database Marketing.

    Step 4: Customer Metrics for Assessing Effectiveness of Programs.

      Choosing and Using the Right Metrics.

    Summary.

6. Customer-Based Organization.

    Organizational Structure.

      The Case of L.L. Bean.

    Incentive Systems.

    Employee Selection and Training.

    Customer-Based Costing.

    New Metrics.

    Who Needs to Do What: Tasks for Various Parties.

     Harrah’s Entertainment, Inc.: A Winning Hand in a Dicey Business.

    Common Mistakes in Implementing a Customer-Based Strategy.

    Concluding Remarks.

Appendix A: Estimating Customer Lifetime Value (CLV).

Appendix B: Impact of Retention on Share and Profits.

Appendix C: Value of Customer Base.

Endnotes.

Index .