Calculating Lifetime Value With R

Sergey Bryl shows how to calculate the lifetime value of a subscription service:

Predicting LTV is a common issue for a new, recently launched product/service/application when we don’t have a lot of historical data but want to calculate LTV as soon as possible. Even though we may have a lot of historical data on customer payments for a product that is active for years, we can’t really trust earlier stats since the churn curve and LTV can differ significantly between new customers and the current ones due to a variety of reasons.

Therefore, regardless of whether our product is new or “old”, we attract new subscribers and want to estimate what revenue they will generate during their lifetimes for business decision-making.

This topic is closely connected to the Cohort Analysis and if you are not familiar with the concept, I recommend that you read about it and look at other articles I wrote earlier on this blog.

Read the whole thing.

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