Modeling the lifetime value of retailers: a guide to marketing actions

Purpose Retailers' lifetime value has implications for practice and research, but little research has dealt with it using a pragmatic approach to date. This study aims to calibrate retailers' lifetime value and provide new perspectives in framing marketing strategies and tactics to enhance shareholder value. Design/methodology/approach Real-world data were collected from 900 retailers and from internal records of two fast-moving consumer goods companies. Multiplicative and Poisson regression models were applied, and two lifetime-value models – discounted cash flow and Pareto – were incorporated. Findings The discounted cash flow model captured the group's lifetime value more accurately, and the Pareto model captured individual retailer lifetime value more accurately. In fact, the discounted cash flow model underestimated, and the Pareto model overestimated retailers' lifetime value. Practical implications The findings should help managers to design marketing actions for individual retailers and groups of retailers to increase shareholder value in the retail setting. Originality/value By modeling and expanding the horizons of the retailer's lifetime value theory using real-world, objective data, this research makes a significant contribution to the body of marketing and retailing literature.