Configuring the Calculate Customer Lifetime Value objective
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
- In the Method section, click Configure.
- 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. - 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.
- 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
- 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.
- Click Save.
Previous topic Configuring the objective Next topic Configuring the Calculate Customer Lifetime Value objective for retail banking