Session 6 - CLV Flashcards
What is money today the same value as money tomorrow ? Time value of money
Money today is worth than money tomorrow
What is CLV used for ?
- To determine how much to spend to acquire a customer.
- To determine how aggressively to spend to retain a particular customer or group of customers.
- To value a company (Facebook, INstagram)
What is the formulate of short-term margin
Revenue COGS - Marketing Spend
What is Retention Rate ?
Its the probability of me being their customer.
What is a long-term multiplier ?
Long-term multiplier : f(retention rate and discount rate)
What is the Discount rate ?
It depends on the industry, something that you assume.
Can you give some example of Retention cost ?
Give coupons to a customers
What is discount rate ?
The discount rate is close to the notion of NPV Net Present Value.
What is the CLV ?
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 remarketing costs.
What is the Net Margin ?
Net Margin = M - R = Gross Margin - Remarketing Cost
How do you symbolize the discount rate ?
d
gsgf
You assume that “r” (retention rate) and “Gross Margin” = M is the same other the time and there is no remarketing cost. The equation is CLV = $M*(1+d)/(1+d-r)
What is $R ?
$R = Retention Spending = Remarketing Costs
r high is good ?
Yes, The higher your “r” is the higher is your CLV.
What is contractual business model ?
We cover contractual business model in this course.
