Customer lifetime value (CLV) prediction

Knowing that a customer is going to bring a certain amount of money for the company early enough can be very helpful to know how much the company can spend to retain it.
Indeed, if a customer only brought in € 10 during his life as a customer in the company, we will not spend more than € 10 to retain him.

There are many techniques out there for estimating Customer Lifetime Value and we are going to introduce you two of them that will allow you to estimate its value without waiting to have a significant purchase history.

The idea of ​​this article is to give you a method that will allow you to estimate the CLV of a new customer.
Usually the CLV is set for a defined period of time, for example how much will a customer bring after one year, two years.

In our study, we will use the behavior of clients from the first 6 months to estimate the CLV at 2 years. All scripts are available on my Github : https://github.com/Faouzizi/customerLifetimeValue/

I. Predicting CLV Using Purchase History
In our case, CLV = the value that the customer generated after 2 years.

The first step is to retrieve the data of all the people who became customers more than two years ago so we can calculate the CLV to build our…