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The Impact of Dependence on the Assessment of Customer Lifetime Value in Buyer-Seller Relationships

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Abstract:

This paper links two important areas of relationship marketing: dependence between buyers and sellers and the assessment of customer lifetime value in business-to-business relationships. It suggests the use of specific customer valuation models in four different types of dependence in buyer-seller relationships. Numerical examples and practical cases are provided to support the argument. For one particular relationship type, the author applies real options analysis to account for the value of the supplier's independence (or, alternatively, flexibility) in the customer lifetime value. The paper contributes to a differentiated and thus better assessment of customer lifetime values in buyer-seller relationships. Managers can use the suggested typology and its metrics to improve decision-making in buyer-seller relationships.

Keywords: ASYMMETRY; BUSINESS-TO-BUSINESS; CUSTOMER LIFETIME VALUE; DEPENDENCE; RELATIONSHIPS

Document Type: Research Article

DOI: http://dx.doi.org/10.1362/026725706776022281

Publication date: February 1, 2006

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