Analyze the Effect of Customer Retention Rate on Customer Lifetime Value(CLV) - Based on the Regression Model

As companies become more profit-driven, they often ignore the importance of boosting or recovering from lost customer retention rate, which potentially leads to greater customer lifetime value and greater success. This paper first provides graphical analyses of the relationship between customer retention rate and customer lifetime value (CLV), and compares the trend with the relationship between profit per customer and CLV. In this theoretical data analysis, the author finds an exponential relationship between customer retention rate and CLV and a linear relationship between profit per customer and CLV. To test the real-world relevance of the result, linear regression analyses are performed on the real-world dataset on telecom customers. The general trend is similar, as indicated in the multivariate regression analysis: increase in customer retention rate impacts CLV more than profit per customer does. However, from the actual data, no significant relationship between profit per customer and CLV is found, but a strong linear relationship between customer retention rate and CLV exists.