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Wednesday, 09 July 2008
 
 

Customer Lifetime Value for Value-Based Servicing, a Realistic Analysis

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Customer Lifetime Value for Value-Based Servicing, a Realistic Analysis

A Business with no prior experience on the use of CLV should start with a simple approach: a limited complexity Customer value model. An RFM (recency - frequency - monetary) score can be used as a proxy for the CLV. This score can be a cost-effective initial Customer value ranking. In certain cases even a recency score may be a complex start. Frequency and/or monetary scores may be more suitable as a starting point. The use of a Customer value ranking is only a means to the efficient use of business resources (value-based management). The accurate estimation of the Customer Lifetime value may be not only very difficult but also of limited business value.
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