CMA Final · Strategic Financial Management · Digital Finance
A wallet company has 20 lakh users and a monthly churn of 2%. Average monthly contribution per active user is Rs 40. Using the simple customer lifetime value formula (monthly contribution divided by monthly churn, undiscounted), what is the lifetime value per user?
Lifetime value per user is Rs 2,000. With 2% monthly churn the expected life is 50 months, and multiplying by the monthly contribution of Rs 40 gives Rs 2,000.
- ARs 800
- BRs 2,000Correct
- CRs 80
- DRs 4,000
Explanation
Expected lifetime = 1/0.02 = 50 months. LTV = 40 x 50 = Rs 2,000. Rs 800 would result from multiplying by 20 months, a wrong lifetime.
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