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Customer lifetime network value: customer valuation in the context of network effects

Author

Listed:
  • Miriam Däs

    (University of Regensburg)

  • Julia Klier

    (University of Regensburg)

  • Mathias Klier

    (University of Ulm)

  • Georg Lindner

    (University of Regensburg)

  • Lea Thiel

    (University of Regensburg)

Abstract

Nowadays customers are increasingly connected and extensively interact with each other using technology-enabled media like online social networks. Hence, customers are frequently exposed to social influence when making purchase decisions. However, established approaches for customer valuation mostly neglect network effects based on social influence. This leads to a misallocation of resources. Following a design-oriented approach, this paper develops a model for customer valuation referred to as the customer lifetime network value (CLNV) incorporating an integrated network perspective. By considering the customers’ net contribution to the network, the CLNV reallocates values between customers based on social influence. Inspired by common prestige- and eigenvector-related centrality measures it incorporates social influence among all degrees of separation acknowledging its viral spread. Using a real-world dataset, we demonstrate the practicable applicability of the CLNV to determine individual customers’ value.

Suggested Citation

  • Miriam Däs & Julia Klier & Mathias Klier & Georg Lindner & Lea Thiel, 2017. "Customer lifetime network value: customer valuation in the context of network effects," Electronic Markets, Springer;IIM University of St. Gallen, vol. 27(4), pages 307-328, November.
    • Handle: RePEc:spr:elmark:v:27:y:2017:i:4:d:10.1007_s12525-017-0255-4
    DOI: 10.1007/s12525-017-0255-4
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    Cited by:

    1. Rainer Alt, 2017. "Electronic markets on transaction costs," Electronic Markets, Springer;IIM University of St. Gallen, vol. 27(4), pages 297-301, November.

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    More about this item

    Keywords

    Customer valuation; Customer lifetime value; Social influence; Network effects;
    All these keywords.

    JEL classification:

    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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