Activity Level as a Link between Customer Retention and Customer Lifetime Value

Customer activity has received more attention due to the increase of social network applications. Moreover, customer activity could be an answer to the research debate about the significant relationship between retention rate and lifetime profitability of customers. Several researchers believe that an increase in the retention rate of customers may enhance their customer lifetime value (CLV), or their lifetime profitability. Other researchers believe that this relationship does not exist or is not significant, and retention rate alone cannot adequately explain lifetime value. This study aims to tackle this challenge and empirically examines the relationship between retention rate and CLV. Moreover, it investigates whether the activity level of customers increases the relationship between retention rate and CLV. This research has been empirically verified in the banking industry; and various techniques including analytic hierarchy process (AHP), mathematical models, and statistical techniques have been used. The empirical results reveal an exponential correlation between the combination of activity level and retention rate with CLV.