Saturday, September 03, 2016
Cutomer Lifetime Value ( CLV ) and how to find it ? by Peter Fader
Book Extract
Cutomer Lifetime Value ( CLV ) and how to find it ?
By Peter Fader
As I celebrate year 30 on the faculty here, I’ve spent about half that time — well, I’ve spent all that time — building mathematical models to predict different things about consumer behaviour.
But I spent about half that time on this notion of customer lifetime value.
Can we look at what a customer has done in the past and make a pretty accurate projection of what they are likely to do in the future? And it’s not only coming up with a single number, it’s breaking it down into how long will this customer maintain the relationship with us?
How many more transactions will they have?
What will be the size of those transactions?
So, it takes in a number of predictive elements that, when you combine them all together, gives you CLV [Customer Lifetime Value]. I’ve been…developing these models, and they’re really accurate and diagnostic, and really good. I’ve been going to companies and saying, “Here is a cool new thing that can really help you run your business better,” and a lot of companies, especially retailers, say,
“Ah, we’re busy.We can’t deal with all of that math stuff, we’re trying to sell things here.”
Let’s try to motivate retailers, or the companies, gaming companies, pharmaceutical firms, telecommunications firms, by thinking about this big, broad strategy of putting the right customers at the centre of everything that we do.
From “How to Find Your Most Valuable Customers” by Peter Fader
Cutomer Lifetime Value ( CLV ) and how to find it ?
By Peter Fader
As I celebrate year 30 on the faculty here, I’ve spent about half that time — well, I’ve spent all that time — building mathematical models to predict different things about consumer behaviour.
But I spent about half that time on this notion of customer lifetime value.
Can we look at what a customer has done in the past and make a pretty accurate projection of what they are likely to do in the future? And it’s not only coming up with a single number, it’s breaking it down into how long will this customer maintain the relationship with us?
How many more transactions will they have?
What will be the size of those transactions?
So, it takes in a number of predictive elements that, when you combine them all together, gives you CLV [Customer Lifetime Value]. I’ve been…developing these models, and they’re really accurate and diagnostic, and really good. I’ve been going to companies and saying, “Here is a cool new thing that can really help you run your business better,” and a lot of companies, especially retailers, say,
“Ah, we’re busy.We can’t deal with all of that math stuff, we’re trying to sell things here.”
Let’s try to motivate retailers, or the companies, gaming companies, pharmaceutical firms, telecommunications firms, by thinking about this big, broad strategy of putting the right customers at the centre of everything that we do.
From “How to Find Your Most Valuable Customers” by Peter Fader
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