Customer lifetime value calculation Compute the customer lifetime value for Customer 421 based on the data below for the first six years of the customer relationship. Costs (ct) were incurred to promote customer retention to a rate of 0.8 in years 1 through 6.
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|
CUSTOMER 421 |
|
Initial acquisition cost |
$600 |
|
n= number of years retained |
6 |
|
r= retention rate for each of the n years retained |
0.8 |
|
Cost of capital |
0.1 |
|
Mt = margin from customer in year t |
|
|
M1 |
$250 |
|
M2 |
300 |
|
M3 |
325 |
|
M4 |
350 |
|
M5 |
375 |
|
M6 |
400 |
|
c1 |
60 |
|
c2 |
50 |
|
c3 |
50 |
|
c4 |
50 |
|
c5 |
40 |
|
c6 |
40 |