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Customer Lifetime Value: Fundamentals

  • Robert C. Blattberg
  • Byung-Do Kim
  • Scott A. Neslin
Part of the International Series in Quantitative Marketing book series (ISQM, volume 18)

Abstract

Customer lifetime value (LTV) is one of the cornerstones of database marketing. It is the metric by which we quantify the customer's long-term value to the firm. This chapter focuses on the fundamental methods for calculating lifetime value, centering on “simple retention models” and “migration models.” We present a general approach to calculating LTV using these models, and illustrate with specific examples. We also discuss the particular case of calculating LTV when customer attrition is unobserved.

Keywords

Hazard Rate Hazard Function Retention Rate Recency State Migration Model 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  • Robert C. Blattberg
    • 1
    • 2
  • Byung-Do Kim
    • 3
  • Scott A. Neslin
    • 4
  1. 1.Kellogg School of ManagementNorthwestern UniversityEvanstonUSA
  2. 2.Tepper School of BusinessCarnegie-Mellon UniversityPittsburghUSA
  3. 3.Graduate School of BusinessSeoul National UniversitySeoulKorea
  4. 4.Tuck School of BusinessDartmouth CollegeHanoverUSA

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