Customer Lifetime Value Analysis 

Purpose

You can use this business process to determine how the value of customer value during the customer relationship. The customer relationship is not examined by calendar period, but instead by lifetime period.

On the basis of historic information, the system can determine how the customer value and number of customers in a customer segment is likely to develop.

Process Flow

...

...

        1.      System provides customer master data and customer profiles (SAP CRM)

        2.      System provides the profitability data (SAP R/3)

This is collected in the operational processes of Profitability Analysis (CO-PA), chiefly costs and revenue data.

        3.      System provides the transaction data (SAP CRM)

This is collected in the operational processes. For example, activities and sales orders.

        4.      System updates data in customer knowledge base (SAP BW)

By regularly extracting data from SAP CRMand SAP R/3 into SAP BW, the system updates the data in the customer knowledge base in SAP BW. This way, the data can be applied in different analyses and for data mining methods.

        5.      Create and run CLTV model based on customer segment (SAP BW)

You use customer segments to create a CLTV model in SAP BW and then you execute the model.

It is preferable to determine homogeneous customer segments on the basis of customer behavior. For this, you can use the data mining method Clustering and then place the result into a master data attribute in SAP BW. You can use this attribute as a segmentation characteristic. However, you can use any other characteristic InfoObject instead.

        6.      System determines retention rate and CLTV by customer segment (SAP BW)

When the CLTV model is executed, the system determines the customer retention rate, the profit per customer for each customer segment and lifetime period the CLTV.

        7.      Run CLTV prediction to determine future CLTV (SAP BW)

You perform the CLTV prediction and use it to determine the future CLTV.

        8.      Transfer CLTV results (SAP BW)

You transfer the results of the CLTV prediction from SAP BW to SAP CRM.

        9.      System updates the CLTV information (SAP CRM)