A Holistic Model Based on CLV for Performance Management in Service Industry

Bank Performance management and customer management were the subjects of researcher's attentions for several decades. This reserch tries to align these two approaches to provide strategic decision making. The proposed holistic approach suggests an integration of customer relationship management system incorporating performance management system considering maximization of customer lifetime value (CLV) metric. For this, a model is being developed to align perfprmance management and customer management. For customer management, we cluster customers based on four dimensions which are product combination, activity level, retention rate, and customer lifetime value. This combination of attributes has not been used before and can bring more useful information. For example, it can reveal which product combination can pinpoint profitable, loyal and active customers. This helps for the prevention of customer migration. However, main novelty of this research is proposing the application of CLV as a financial metric in strategic performance management in a holistic manner. The research model has been applied in an Iranian commercial retail bank. In implementation, various techniques and mathematical models including genetic K- Means, analytic hierarchical processes (AHP), and data envelopment analysis (DEA) have been used.