LTV Prediction Model In Installment Scenarios
1. Background In many businesses with recurring payments—e.g. installment plans, subscription services, financing, insurance renewals etc.—one key task is to estimate the lifetime value (LTV) of a customer. We call this pLTV (predicted lifetime value). For why we need to estimate LTV: With pLTV, we can acquire more valuable new users from advertise platforms (e.g. Google Ads, Meta Ads etc.) With pLTV, our financial team can estimate the company’s cash flow in the near future and make better decisions In our setting, because the cash flows accrue monthly (or at some periodic cadence), we may want to estimate the predicted LTV at the end of each month, and potentially project out over a long horizon (e....
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