Appendix C. VALUE OF CUSTOMER BASE
In this Appendix we provide mathematical details for assessing firm value based on the value of customers.
VALUE OF A FIRM'S CUSTOMER BASE
Conceptually, the value of a firm's customer base is the sum of the lifetime value of its current and future customers. We first build a model for the lifetime value of a cohort of customers, then aggregate this lifetime value across current and future cohorts, and finally construct models to forecast the key inputs to this model (e.g., the number of customers in future cohorts).
We start with a simple scenario where a customer generates margin mt for each period t, the discount rate is i and retention rate is 100%. In this case, the lifetime value of this customer is simply ...
Get Managing Customers as Investments The Strategic Value of Customers in the Long Run now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
