Lifetime Value Tutorial - Run Analysis

Each model includes a sample data set (OfficeStar) that can be found under the Tutorials dropdown on the Enginius Dashboard.

The remainder of the tutorials use the Lifetime Value OfficeStar data set as the starting data set.

Lifetime Value Run Analysis Settings (OfficeStar Default Settings)

Select the options and appropriate data blocks to complete your analysis. At a minimum, you need to select Segment description and Transition matrix data blocks for the analysis to run.

Customers

• Segment description (required): Select the Enginius data block that contains your segment data. 
• Include next-period costs: Select if you have provided next-period costs for the segments. 
• Include acquisition costs: Select if you have provided acquisitions costs for the segments.
• Transition matrix (required): Select the Enginius data block that contains your transition matrix.
• Customer acquisition scenario: Select the Enginius data block that contains your acquisition scenario.

Discount rate

• Discount rate (%): Indicate the discount rate to apply for the value of a dollar spent or received in the future compared with currently. A discount rate of 15% means that $100 profit in the next period is only "worth" $86.90 in today's dollars, after applying the following formula:

Discounted Value = Value / (1 + Discount Rate)

A greater discount factor reduces the impact of future revenues on CLV computations and thus focuses on short-term profits. You should increase the discount rate for turbulent or rapidly evolving markets, in which conditions change rapidly and future revenues therefore are highly uncertain. The discount factor gets applied after each period, regardless of how you define a period. If you define a period as a quarter, a discount factor of 15% translates into an effective yearly discount rate of almost 48% (15% discount rate applied four times per year). Remember to take this multiplicative effect into account when selecting an appropriate discount factor. 

• Apply discount rate to first period: Check to apply the discount rate to the first period. This is typically dependent on when customers pay. If customers pay at the beginning of the period, the contribution margin for the first period does not have to be discounted. If customers pay at the end of the period, the discount rate should apply to the first period.

Model setting

• Transactional or Contractual:Select either Transactional or Contractual depending on the nature of the product or service you are modelling:
  • Transactional models imply discrete transactions with no implied end to the relationship (although customers who lapsed for several periods might be considered “lost” once and for all).
  • Contractual models imply the existence of a contract between the transacting parties (e.g., a mobile phone contract between the provider and consumer). Contractual relationships imply continuous transactions and a known end to the contract.

For use with our CLV model, the impact of this setting will affect the first period of the analysis. A Contractual setting implies no loss/gain of customer in the first period (since the customer is under contract) while the Transactional setting will reflect loss/gain in the first period.

Your Enginius report can be generated in many different formats. Clicking the globe beside the Run button will allow you to select a new report format.

After selecting the desired model options, click  to generate the report in the desired format.