A Numerical Approach to the Customer Lifetime Value

Abstract

In this paper, we show that it is possible to estimate discount rate or cost of capital in the calculation of customer lifetime value (CLV) for a company using numerical methods instead of the traditional financial approaches. We propose an estimation formula for retention period that the company should keep the customers in order to gain certain benefit from them. We also apply our theoretical approaches to the Mongolian mobile service at company level using statistical data from 2005 to 2016. Some numerical results are included.