In this article the authors demonstrate how a customer lifetime value
approach can provide a better assessment of advertising effectiveness
that takes into account postpurchase behaviors such as word-of-mouth.
Although for many advertisers word-of-mouth is viewed as an alternative
to advertising, the authors show that it is possible to quantify the
way in which word-of-mouth often complements and extends the effects of
advertising. The authors provide a simple approach to the measurement
of postpurchase word-of-mouth sales effects and demonstrate how firms
may be underestimating advertising effectiveness by ignoring such
effects. Their approach illustrates how customer lifetime value models
can provide an important tool to assess the long-term effects of
advertising campaigns.