Estimating customer lifetime value for new product development based on the Kano model with a case study in automobile industry

In previous studies, historical information of customer had been used for determining customer lifetime value (CLV). The purpose of this paper is to modify CLV estimation to be applied before producing a new product.

In this study, the CLV estimation has been modified using Kano satisfaction coefficient. The Kano satisfaction coefficient has been assumed as loyalty indicator in estimating CLV and related equations have been developed for allocating Kano requirements to various phases of product life cycle. The proposed approach has been examined in two new product options of the automobile industry. Finally, by using customers’ purchase records during three years, CLV has been calculated for both product development options.

Findings indicate that CLV of the first development option is equal to 407 million and 500,000 toumans and of the second option is equal to 392 million toumans, this difference is related to different requirements of the Kano model, and as a result, to different satisfaction coefficients. Therefore, the first option has been suggested for investing in developing new product.

Application of the proposed approach is limited to short time periods. The findings are limited to the automobile industry.

The modified approach of estimating CLV can be applied for prospective new product development in addition to traditional approaches in which, only the historical data of sold products are used. In addition, using Kano satisfaction coefficient in estimation of CLV in short periods, seems an appropriate approach for competitive industries that focus on dynamic needs of customers.