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CLV Overview Methodology Profit Evolution Cost to Serve CLV Timeline Example Contact Strategy

Customer Lifetime Value Overview

Our Customer Lifetime Value (CLV) model combines predicted revenue streams with survival analysis to calculate the expected financial return from each customer over their lifetime. The model dynamically updates as actual data becomes available, refining predictions and adjusting survival probabilities.

Key Components

1
Predicted Monthly Profit
Monthly profit expectations based on customer contract terms, including price increases each April for Handset customers, and improved margins post-contract (month 25+).
2
Survival Probability Curves
Statistical models that predict the likelihood of customer retention for each month, updated with the latest churn data.
3
Net Actual Revenue Collection
Real monthly net profit figures collected over time (gross profit minus customer service costs and usage costs), replacing predicted values as they become available.
4
Dynamic CLV Calculation
Sum of collected actual net revenue (after cost deductions) plus expected future revenue (predicted × survival probability) for remaining months.

Monthly Profit Evolution

Expected Monthly Profit Progression by Device Tier

📱 Low Tier Devices

Early Contract
Now until next April
~£7.19
Mid Contract
Next April to following April
~£8.11
End Contract
Following April to Contract End
~£8.96
Post Contract
Months 25+
~£13.94

📱 Mid Tier Devices

Early Contract
Now until next April
~£4.29
Mid Contract
Next April to following April
~£5.34
End Contract
Following April to Contract End
~£6.54
Post Contract
Months 25+
~£23.27

📱 High Tier Devices

Early Contract
Now until next April
~£4.45
Mid Contract
Next April to following April
~£5.92
End Contract
Following April to Contract End
~£7.22
Post Contract
Months 25+
~£32.96

📶 SIMO Subscriptions

Early Contract
Now until next April
~£4.23
Mid Contract
Next April to following April
~£4.32
End Contract
Following April to Contract End
~£4.41
Post Contract
Months 19+ / 25+
~£4.41

Cost to Serve

To provide accurate Customer Lifetime Value calculations, we collect actual monthly costs associated with each customer. These costs are deducted from the gross monthly profit to calculate the true Actual Collected revenue that impacts CLV.

Cost Components

1
Customer Service Contacts
Direct costs associated with customer support interactions, including phone calls, chat sessions, email support, and technical assistance provided to each customer.
2
Usage Costs
Variable costs directly attributable to customer usage patterns via network costs, comprising roaming charges and out-of-bundle calls including premium rate services and international calls.
3
Net Revenue Calculation
Monthly net revenue is calculated as: Gross Monthly Profit - Customer Service Costs - Usage Costs = Net Actual Collected Revenue.

Net Actual Collected = Gross Monthly Profit - Service Costs - Usage Costs

Impact on CLV: By incorporating these actual costs into our revenue collection, we ensure that CLV calculations reflect the true profitability of each customer relationship, providing more accurate insights for business decision-making and customer investment strategies.

CLV Timeline Example

This example shows how CLV evolves as we progress through the customer lifecycle and collect actual net revenue data (after deducting customer service and usage costs).

Point of Sale
Initial CLV calculation based entirely on predicted values and survival curves. No actual revenue collected yet.
Actual Collected
£0.00
Expected Future
£185.95
Total CLV
£185.95
Month 1
First actual payment collected, with service and usage costs deducted. Survival curves updated with latest data, slightly reducing future expectations.
Net Actual Collected
£4.58
Expected Future
£177.96
Total CLV
£182.54
Month 14
14 months of net actual revenue collected (after service and usage cost deductions). Updated survival curves applied to remaining predicted revenue stream.
Net Actual Collected
£71.23
Expected Future
£113.80
Total CLV
£185.03
Month 25
Contract completed! Enhanced post-contract margins reflected in improved CLV. Net revenue after all service and usage cost deductions.
Net Actual Collected
£166.89
Expected Future
£61.25
Total CLV
£228.14

Calculation Methodology

Monthly CLV Calculation Formula

CLV = Σ(Net Actual Revenue Collected) + Σ(Predicted Monthly Profit × Survival Probability)

Where Net Actual Revenue = Gross Revenue - Service Costs - Usage Costs

Process Flow

1
Generate Predicted Revenue Stream
Create monthly profit projections extending up to 200 months, incorporating contract terms, price increases, and post-contract improvements.
2
Apply Survival Probability
Multiply each predicted monthly profit by the corresponding survival probability to calculate expected revenue for that month.
3
Sum Expected Revenue
Total all expected monthly revenues to calculate the initial CLV at point of sale.
4
Replace with Net Actual Data
As each month passes, replace predicted values with net actual collected revenue (gross revenue minus service and usage costs) and recalculate CLV using updated survival curves.
5
Continuous Refinement
Update survival curves with the latest churn data monthly, improving accuracy of remaining predictions.