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Lifetime value (LTV)

Lifetime value is the 

total net benefit that a 

customer or group of 

customers will provide 

a company over their 

total relationship with the 

company.

Figure 9.18

Different representations of  lifetime‑  value calculation

Future

Segment

1

Individual

Historic

2

3

4

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Chapter 9  Customer relationship management

Figure 9.19

An example of an  LTV‑  based segmentation plan

Retain

and extend

Gold

Retain

Reduce

costs

Extend

Platinum

Bronze

Silver

1

2

3

F

Y

X

A

B

C

G

H

High

High

Low

Low

Curr

ent value

Future potential value

In the virtual world customer service is a key difference between brands. Jevons and Gabbot 

(2000) explain: ‘the   first-  hand experience of the brand is a more powerful token of trust than 

the perception of the brand’.

Research across industry sectors suggests that the quality of service is a key determinant of 

loyalty. Feinberg et al. (2000) report that if reasons why customers leave a company are con-

sidered, over 68% leave because of ‘poor service experience’, with other factors such as price 

(10%) and product issues (17%) less significant.

customers are the best customers, so it is important to understand the communication pref-

erences of these customers and not to  over-  communicate unless there is evidence that they 

may defect.

Excelling in e-commerce service quality

Focus on

Mini Case Study 9.9

Zappos is a US online clothing retailer often referred to as a pioneer in online marketing. Tony Hsieh, CEO 

of Zappos, puts its success down to a  customer‑  centric approach. He says simply: ‘We pay more attention 

to our customers’. He explains, ‘People may not remember exactly what you did or what you said, but they 

will always remember how you made them feel’. Tony’s summary of the evolution of the Zappos brand has 

seen it go from simply having a strong customer focus to being really passionate about how it makes their 

customers feel (Figure 9.20):

1999 Selection

2003 Customer Service

Zappos delivers customer happiness

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Part 2  Strategy and applications

2005 Culture and Core Values as our platform

2007 Personal Emotional Connection

2009 Delivering Happiness

Overall, the approach seems to be successful. In 2009, Amazon purchased Zappos for $1.2bn. Here is 

our summary of the five success factors we can take from Zappos’ success which can be applied to other 

businesses: