Consider a firm that acquires 15,000 customers every year. The number of active customers in each year the firm operates is given in Table 3 below:

The last row in Table 3 gives the total number of active customers in each year.

Using market research, the firm has enough information on its customers to classify them into two segments: 

Segment 1 and Segment 2. Assume, as we did in class, that 1/3 of the total number of customers in any new cohort are Segment 

1. The rest belong to segment 2. The segment level retention rates are: 0.8 for the customers in segment 1 and 0.4 for customers in segment 

2. Using this information on heterogeneity, a margin of $100, a discount rate of 10% and the methodology , determine the Customer Equity of the firm’s customer base in 2017. Finally, assume that you project your CLV calculations for each segment over the lifetime as predicted by their behavioral variables (Hint III-I: use the segment level retention rates).
 

Table 3: Number of active customers from each cohort in a year 2013 15000 15000 2014 8000 15000 23000 2015 4800 8000 15000 27800 2016 3200 4800 8000 15000 31000 2017 2304 3200 4800 8000 15000 33304