Customer Lifetime Value drivers of independent retailers within South Africa’s informal trade environment: an empirical case study

Abstract

Customer Lifetime Value (CLV) is a “technique for analysing all the potential value purchase values from a single customer over the lifetime of a relationship with a supplier or service provider” (Doyle, 2016). It is a valuable measure that can be used to segment customers according to their profitability in order to implement customer-focused marketing strategies. The study looks at independent retailers that operate within the informal trade environment and are directly serviced by a consumer packaged goods (CPG) company within the snacking category. Through the analysis of these customers, this study aims to provide empirical evidence to support the utilisation of CLV as a customer segmentation tool within a business-to-business (B2B) setting based on CLV drivers. This study also seeks to understand whether short-term macroeconomic indicators such as inflation do indeed have an effect on CLV. Through the use of the Venkatesan-Kumar method for calculating CLV as well as classification trees, the study aims to create a decision rule process whose end result will be a CLV classification system. The results will equip companies with the tools and ability to identify which customer segment a customer belongs to in order to ensure that they use the appropriate customer relationship management strategies to drive customer development and retention