MKTG 3596 Lecture Notes - Lecture 4: Retention Rate, Chittaranjan Locomotive Works, Diminishing Returns
Document Summary
Net present value of the profit that you will realize on the average new customer during a given number of years. Look at how customers behaved in the past and use this to predict how they will behave in the future. Stream of net contribution over time that determines clv. Net present value of future streams of contribution. We use net present value (npv) because a dollar generated a year from now is worth only some fraction of it today. Able to quantify value of one"s customer base. Able to evaluate marketing actions (ex. promotions, customer service, etc) Discount future amounts because we are unsure if we"ll get it (risk) Money today is worth more than money in the future (because we could invest money today and make interest on it) Eventually, future contributions way out become worth almost zero. Still somewhat advanced technique, about 23% of firms calculate clv.
