State-of-the-art CLV models capture this issue by focusing on the interplay between recency and frequency of each customer’s transaction history. Along with monetary value (i.e., spend per transaction) the noncontractual firm has three key variables that should drive its CLV calculations. And although such models can indeed be fairly complex, the origins of the recency-frequency-monetary value rubric go back to Lester Wunderman and the other pioneers of direct marketing.
