Please enable JavaScript.
Coggle requires JavaScript to display documents.
Marketing Economics (How can LTV be used (A currency for M&A activity,…
Marketing Economics
How can LTV be used
A currency for M&A activity
Total Lifetime customer value = Total lifetime Value of existing customers + of new customers - of lost customers
Some basis for "FIRING" customers
Learn about PATTERNS of customer behaviors
Understand VALUE of customer
Some basis for "REWARDING" customers
Identify CROSS-SELLING opportunites
Quantify IMPACT of marketing actions
Conduct SENSITIVITY analysis
Borrowing from MONEY MARKETS
Could guide/discipline INNOVATION Efforts
Common step
Step 1: Determine Gross margin
1.a: Determine Revenue
1.b: Determine Costs (COGS, shipping, etc.)
Step 2: Determine Acquisition Costs
Step 3: break-even analysis (optional)
How many transactions/years to break even
Step 4: Probability of Cash flow in future years
Step 5: Discount cash flows in the future
Customer Lifetime Value (for long term)
Cost per customer = Cost of contacting all prospects / No. of customers obtained
LTV = M/(1-r+i) - AC
Acquisitions cost
sales commission paid per subscriber
subsidy provided to the subcriber
advertising per gross ad
Caveats
Retention rates is constant
contractual settings