Dear Farooq

The first question is to know how many times an average customer buys the product over a specific period of time. Many years ago I did a similar research (not academic, but finally presented at an academic conference), for cars. When we found that a customer normally buys 7 cars per life, then we had a much more reliable reference for assessing CLV.

All the best

Dear Farooq,

I have performed CLV in telecoms as a consultant - not as a researcher.    This has generally been performed at a customer segment and channel level rather than individual customer basis.  With prepaid, the challenge on segmentation may be limited information on customers.

Customer revenues will include prepaid revenues for each account.  Generally, the CLV will include the cost of acquiring the customer which may include commissions paid to retail outlets or any other channels as well as other sales related costs.    The costs of servicing the client will include the cost to the company of calls made by the customer.  This may include charges from other telcos and/ or internal network costs dependent on whether the company owns a network - (where the company owns a network this is based on network modelling and the types of calls made) as well as customer administration and customer service costs (these can be allocated using activity based costing - difficult at the individual customer level if the company doesn't track customer service interactions at that level).   

As the prior researcher indicated the amount of time that the customer is with the telecom is important to CLV.  A net present value calculation is performed of the above aspects over the life the relationship.  Customers can be segmented based on usage behaviour or location if little information is available about the customers.

Care is required in interpreting the outcomes and making decisions as many of the costs are relatively fixed and may not change with a reduction in customers.   

The effort and data required for the above depends on the accuracy required which will affect the quality of decisions.  A single average customer is not that hard to calculate but may not mean that much.

I have attached an article on CLV that I authored which was published in a professional journal.  It does not focus on telecoms but includes the main concepts of CLV.   I have also attached an article on approaches to customer profitability calculation - this was developed when I was working in Telcos.

Thank you Mark Edward Pickering and Djamchid Assadi for your valuable answers.