An Empirical Analysis to Design Enhanced Customer Lifetime Value Based on Customer Loyalty: Evidences from Iranian Banking Sector

Abstract

The more a marketing paradigm evolves, the more long-term relationship with customers gains its importance. Also, the move towards a customer-centred approach to marketing, coupled with the increasing availability of customer transaction data, has led to an interest in understanding and estimating customer lifetime value (CLV). There are several researches about the CLV formulas and calculating relations. But the effect of the CLV on the other departments of the organization and especially the effect of the CLV on the key parameters for organization’s profitability such as customer loyalty and satisfaction had little attention. This research is about these shortcomings and covers another essential element for organizational sustainable profitability, customer loyalty. The main purpose of this research is to demonstrate the effect of customer loyalty on the customer lifetime value. For this purpose one of the biggest parts of service sector in Iran is selected and the data from this sector are gathered and analyzed. Banking sector is the biggest body of Iranian service sector of economy. By means of a valid questionnaire, data were gathered from banking sector and after analyzing the hypotheses, results show that the high customer loyalty strongly affects on the enhanced customer lifetime value. In the final section of this paper, both applied and theoretical recommendations will be provided.

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