Segmentation and Lifetime Value Models Using SAS

3The Simple Retention Model

Contents

3.1 The customer annuity model

3.2 The simple retention model

3.3 Estimating retention rates

3.4 Per-period cash flows m

3.5 Chapter summary

     Your company acquires customers, provides them with a product or service, and makes a certain amount of profit each month until they terminate the relationship forever. How much profit do you expect to make from customers during their lifetimes? How would increasing retention rates affect future profit?

     These are very common questions. Contractual service providers such as Internet service providers, health clubs, and media content providers (for example, Netflix, digital content subscribers, and so on), are in exactly this situation. For example, subscribers ...