Prof. Dr. Christian Schlereth (WHU Vallendar):
"Zombies in digital freemium business models - Do customers contribute to CLV after their 'death'"
Thursday, June 2nd, 02:00pm - 04:00pm (WiSo Building, Room 410)
Customer lifetime value (CLV) is one of the core metrics for digital freemium business models and frequently used for acquisition and retention decisions for payed subscriptions. Key assumption of this metric is that customers have only one life and that they are considered as ‘dead’ after canceling their payed subscription. This paper challenges that assumption and examines CLV beyond customers’ first life, i.e. the value of zombies (customers in their second or later lives) compared to new subscribers of the same cohort. We also study the extend of underestimation of first life customers, when ignoring the possibility that some churned customers may come back to life after some time. Looking at payed subscription data spanning more than 7 years and covering hundred thousands of customers, we find that about 13% of churned customers exhibit a zombie-like behavior. We develop a comprehensive CLV model including multiple customer lives and the return probability of a ceased customer. Preliminary results show that CLV of churned customers suffers from underestimation between 17.25% and 54.28%. The amount of underestimation is driven by customers switching between different contract lengths in their multiple lives. But marketers also need to account for that customers, who come back are less valuable than first time customers.