case study on the wireless telecommunication industry
An LTV model and customer segmentation based on customer value: a case study on the wireless telecommunication industry
Since the early 1980s, the concept of relationship management in marketing area has gained its importance. Acquiring and retaining the most proﬁtable customers are serious concerns of a company to perform more targeted marketing campaigns. For effective customer relationship management, it is important to gather information on customer value. Many researches have been performed to calculate customer value based on Customer lifetime value (LTV). It, however, has some limitations. It is difﬁcult to consider the defection of customers. Prediction models have focused mainly on expected future cash ﬂow derived from customers’ past proﬁt contribution. In this paper we suggest an LTV model considering past proﬁt contribution, potential beneﬁt, and defection probability of a customer. We also cover a framework for analyzing customer value and segmenting customers based on their value. Customer value is classiﬁed into three categories: current value, potential value, and customer loyalty. Customers are segmented according to three types of customer value. A case study on calculating customer value and segmenting customers of a wireless communication company will be illustrated.