Calculating lifetime value example

lifetime_value.rb

# Customer Acquisition Cost
@total_cac = 5_000.0
@discounts = 1_000.0
@new_customers = 30

@cac =
  (@total_cac + @discounts) / @new_customers

puts "Customer Acquisition Cost: #{@cac}"

# Average Revenue Per Unit
@revenue = 10_000.0
@total_customers = 200

@arpu =
  @revenue / @total_customers

puts "Average Revenue Per Unit: #{@arpu}"

# Gross Margin
@revenue = 10_000.0
@direct_costs = 2_000.0

@gross_margin =
  (@revenue - @direct_costs) / @revenue

puts "Gross Margin: #{@gross_margin}"

# Churn
@revenue = 10_000.0
@canceled_customer_revenue = 800.0

@churn =
  @canceled_customer_revenue / @revenue

puts "Churn: #{@churn}"

# Retention
@base = 1.0
@retention = 0

while @base > 0.1
  @base -= @base * @churn
  @retention += 1
end

puts "Retention: #{@retention}"

# Lifetime Value
@lifetime_value =
  (@arpu * @retention * @gross_margin) - @cac

puts "Lifetime Value: #{@lifetime_value}"