Teaching Notes for this Marketing Activity
Preferred format: This teaching activity should be run in student pairs or small groups.
Student audience: This discussion exercise is more suitable for advanced students studying services marketing or marketing metrics.
Exercise time: This activity will probably run around 10-15 minutes.
Additional resources: Please refer to the comprehensive guide to customer lifetime value website.
Notes: There are two other activities on this site: one provides a simple introduction to the customer lifetime value formula and the other gets students to interpret its outcomes.
For this exercise, you will work through a complete calculation of customer lifetime value, which is provided over a ten-year period with all information clearly provided. Your task is to essentially explain the mechanics of the calculation.
The following diagram can be enlarged by clicking, and it provides a ten-year view of customer lifetime value, with the final key number listed in the bottom in yellow.
- Work through each line of the calculation and take turns in your group to explain what is happening in each row.
- Once this is completed, work through the mechanics of the calculation and discuss why each row is necessary.
- What options with this particular situation have in order to improve final customer lifetime value (that is, what numbers could increase or decrease) to increase the final value?