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Configuring the Calculate Customer Lifetime Value objective

Updated on August 4, 2022

The Calculate Customer Lifetime Value objective allows you to define how customer lifetime value (CLV) is calculated in Pega Customer Decision Hub.

Customer lifetime value (CLV)
Customer lifetime value is an estimation of the net profit predicted for the entire future relationship with a customer.
Pega Customer Decision Hub
Before you begin: See Creating strategies.
  1. In the Method section, click Configure.
  2. In the Configure Calculation Method for CLV dialog box, select a calculation method by clicking Add.
    Result: Available calculation methods and expressions used by each calculation method are displayed. Basic Calculation is the default method.
  3. Click Apply.
    Result: Additional configuration settings for the selected calculation method appear. For the default Basic Calculation method, the following settings are available:
    Acquisition cost
    The cost of acquiring the customer.
    Annual profit
    The yearly profit from the customer, excluding acquisition costs.
    Retention rate
    The annual rate of retention of your customer base.
  4. For the default Basic Calculation method, enter the following constant values:
    For example:
    • Acquisition cost = 50
    • Annual profit = 1400
    • Retention rate = 80

    The Basic Calculation method applies the following calculation expression for the Customer Lifetime Value:

    (Annual profit * YearsACustomer) – Acquisition cost

    where YearsACustomer = 1/(1 - Retention rate as a decimal value).

    So, the calculated Customer Lifetime Value in this example is:

    {1400 * [1/(1-0.8)]} - 50 = [1400 * (1/0.2)] - 50 = (1400 * 5) - 50 = 6950

  5. Configure the values for the available fields. You can select the following types of values for each field:
    • Constant – Enter a number which represents the value.
    • Property – Select a property from the customer class that contains the value.
    • Strategy – Configure a Strategy that returns this value. After selecting a Strategy, select the strategy result property that contains the value.
  6. Click Save.
  • Previous topic Configuring the objective
  • Next topic Configuring the Calculate Customer Lifetime Value objective for retail banking

Tags

Pega Customer Decision Hub 8.5 Decision Management

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