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A Renewable-Resource Approach To Database Valuation, Xavier Dreze, Andre Bonfrer
A Renewable-Resource Approach To Database Valuation, Xavier Dreze, Andre Bonfrer
Research Collection Lee Kong Chian School Of Business
We demonstrate in this paper that firms should view customers in a database as a renewable resource when valuating them. Indeed, customer names flow in and out of the firm’s databases, and the goal of the firm is to optimize the overall customer acquisition/cultivation/attrition process. The renewable resource approach to the problem of maximizing the profits generated by a flow of customer names is more appropriate than the traditional Customer Lifetime Value (CLV) approach. We show that CLV underestimates the true value of names (by more than 400% in some cases) and leads to sub-optimal customer relationship management and acquisition …