Customer Life Time Value

You are considering launching a campaign to acquire new customers through the web. How much are you willing to invest in acquiring a customer?
You suspect that a given customer is about to defect and switch to a competitor. Would you try to keep this customer or let her go?
You want to assess the value of your business. How would you evaluate the worth of your customers?
Well, all of these questions boil down to assessing the life time value of your customers, often abbreviated as LTV. Certainly one would be willing to acquire a new customer only if the cost of acquiring the customer is lower than the life time value of the customer. Not only companies are happy to get rid of unprofitable customers but in many cases companies may take active actions to make these customers defect to their competitors. And, finally, in the new world, and also in the more “conventional” industries, the value of a company is given by the aggregation of the life time value of their customers.

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