The Model Of Telecommunications Customer Life Value And The Application Of Customer Segmentation

Since the early 1990s, Customer relationship management (CRM) caters for the change and development of market in the new economic environment. The theory and method of CRM can direct enterprises to adjust their customer relationship well, so more and more enterprises pay much attention to it. Customer lifetime value (CLV) is the key concept within CRM and it has become a main study area of CRM. Enterprises can identify different rank of customers and allocate their resources properly to different customers properly through the analysis of CLV, and they gain more profit from valuable customers so as to develop their competence in competition.Compare with other industries, CLV is more significant to telecommunication industry which has huge fixed investment in previous period and low marginal cost of developing a new customer. Therefore, customer resources are getting more and more important to the telecommunications operators. However, With the increasingly fierce market competition, customer churn is very severe in telecommunications operators of our country. Therefore, customer retention has surprising influence on the profit ability of telecommunications operators. The scholars reported that the net present value increase in profit that results from a 5% increase in customer retention varies between 25 and 95% over 14 industries. It has been argued that customer retention is the most vital goal of enterprises success. However, the goal of customer retention is not striving for zero defection. Instead, enterprises should focus on managing their churn rate and identifying and upgrading CLV. In order to practice the strategies of customer retention successfully, telecommunications operators must segment customer properly.For the reason above mentioned, the paper puts forward a new CLV model and applies it to segment customer based on CLV, by the way of literature induction and antitheses. The main contributions of this paper lie in three aspects:Firstly, the paper illustrates the theory framework correlated with CLV, including customer lifetime value theory and customer loyalty theory. Then based on these theories and the researches of other scholars, the paper suggests an new CLV model to calculate customer value considering customer churn. And the model is the sum of customer historic value, customer current value and customer potential value. Then, this paper gives the means to define the main parameters in CLV model, constructs a logistic model for predicting customer potential value in detail.Secondly, this paper illustrates a case study on calculating the CLV using the real data of a wireless telecommunications operator to prove the maneuverability and validity of the model.Thirdly, the model is used for customer segmentation. Current value, potential value, and customer loyalty are used as dimensionality to design the new three-dimensional customer segmentation, and this paper gives the corresponding policies of the customer retention to each category.The research results of this paper are supplementary to quantitative study on customer lifetime value theory and will also play an active role in the process of telecommunications operators decision-making.