May 07, 2008

Startups And Life Tables

Occasionally, I am asked what to do with a startup product, brand, or channel. In other words, you launch a new product, and after four months, you want to get an idea what the annual retention rate might be for customers purchasing from this new product.

This is where you use a life table to guess at what might happen.

The life table tells you the probability of a customer purchasing again in your embryonic product line. Once you have the details, you estimate the corresponding annual rate.

Later, I'll include a case study on this topic.

Merchandise Lifetime Value - MLV - Depends On First-Year Performance

Let's say that a new item performs in the bottom 45% of the assortment. Five-Year Cumulative Demand = $348. Let's say that a n...