Just like we use Net Present Value (NPV) to evaluate
investments and companies, we use CLV to evaluate customer relationships CLV is
the expected NPV of the cash flows from a customer relationship CLV is defined
as the discounted sum of all future customer revenue streams minus product and
servicing costs and re marketing costs
Let us assume we are analyzing the customer life time value of a company which offers services of a kind . The following are obtained.
Where ,
This is a simple model of calculation. The formula differs when the service is offered before the contribution from the customer. [ Eg- Credit cards ]
No comments:
Post a Comment