Customer Loyalty and Lifetime Value: An Empirical Investigation of Consumer Packaged Goods

It is traditionally accepted that customer loyalty is critical for a firm’s profitability. Recent research,however, questions the effects of customer loyalty on profitability. In light of this controversy, we examine the financial effects of customer loyalty using the framework of customer lifetime value (CLV). Our analysis reveals that in the area of consumer packaged goods, customer loyalty is positively associated with customer revenue and customer retention, both of which drive CLV. Thus, customer loyalty is indeed a predictor of long-term customer profitability to a firm. For marketers, customer loyalty continues to be a legitimate end goal to pursue in marketing management.