Marketing Budget Allocation: Using Customer Lifetime Value as Your Guide

Abstract: The paper evaluates the usefulness of a customer lifetime value (CLV)-based framework for allocating marketing resources in business-to-business settings in an emerging market. The CLV-based framework enables managers to build long-term customer relationships through customizing different elements of the marketing mix with the purpose of enhancing brand equity and maximizing the lifetime value of each business customer. Previous research does not address the issue of applying the CLV-based model for resource allocation in emerging economies and this study attempts to fill that void. The analysis is based on the data from a multinational company selling computer hardware components to business customers in Russia. Marketing managers can use results of this study to guide their marketing budget distribution decisions to effectively and efficiently reduce the costs associated with customer acquisition, enhance customer retention, and increase customer profitability with marketing–based activities