The customer lifetime value (CLV) is the discounted
value of the future profits that this customer yields to
the company. In order to compute the CLV, one needs to
predict the future number of transactions a customer
will make and the profit of these transactions. With the
Pareto/NBD model, the future number of transactions of a
customer can be predicted, and the CLV is then computed
as a discounted product between this number and the
expected profit per transaction.
