About this paper
Companies calculate customer lifetime value (CLV) for many reasons, including improved target marketing, value-based customer segmentation and strategic investment planning. There are several common approaches to calculating CLV, but no standard way – and little evaluation as to the pros and cons of using one method over another. The most common methods are often inaccurate; and even when the inputs are accurate, the mathematics are typically insufficient to yield valid financial calculations. This paper explores the most common approaches to calculating CLV and evaluates their accuracy. Ultimately, it presents new and improved mathematics for calculating CLV that overcome the weaknesses inherent in most approaches used today.
SAS is the leader in business analytics software and services, and the largest independent vendor in the business intelligence market. Through innovative solutions, SAS helps customers at more than 70,000 sites improve performance and deliver value by making better decisions faster. Since 1976 SAS has been giving customers around the world THE POWER TO KNOW®.