Customer Profitability and Lifetime Value Analysis: Application to an Aftermarket Automotive Spare Parts Multinational

Huang Lijun

Abstract

It’s very crucial to have an idea of current profitable at the individual level so that we can distinguish the relatively more profitable customers from the less profitable customers. And it will be the first stage to develop estimates of customers’ lifetime values. However, it will be more complicated to study it when there is an intermediary in the supply chain such as a distributor, because not only those cost incurred indirectly to service the customers but also the cost generated in dealing with its own suppliers to provide for goods to this customer. The purpose of this project is to build a general model and measurement method to see what the relationship of customer profitability and customer characteristics in a supply chain will be for the company I have been working for, company A. What’s more, I will conduct some data analysis to show how the differences of company A’s customers purchasing characteristics can result in different profit implications and the implementation of this method by using company A’s operational data.