I work for banking domain, I want to calculate the customer lifetime value to calculate RFM score, For M - Monetary I plan to consider LTV for the same.
Kindly help me with the formula to calculate LTV
I have a lot of experience in the banking domain. (Trust me.)
Generally LTV is understood as loan-to-value ratio, where value represents the estimate at origination of the loan of the property securing the credit. It's a credit risk metric, while RFM measures recency, frequency and monetary is shorthand for how much the customer spends. This leads to an assessment of how likely the customer is to seek credit from a lender.
Let's say a customer's M is to spend is to buy a house appraised at $1 million in period n, following by some other hypothesized sequence of purchases . To calculate LTV, you have to know what loan the lender is willing to make based on its underwriting criteria for the house, the car, the home improvement loan, the construction bridge loan, the HELOC, the second lien mortgage, the signature loan, ... and so on, and so forth.
That said, take a look at the rfm package, but I'd encourage you to clarify your algorithm.
Thanks a lot for your response.
My question is concerned with how to identify a customer's life time in a bank.
If you could help me with this query I would be grateful.
Check the R search engine. I found a dataset for credit risk that probably has some activity history that you can explore for ideas of a model of duration.
As you'd expect, retention models of banks tend to be proprietary.
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