Customer Segmentation - Data Mining Techniques in CRM: Inside Customer Segmentation - page 217

1. ARPU (Average Revenue Per Unit): A revenue-only measure which does
not take into account the different product margins, the costs to manage, and
the expected customer lifetime (length of relationship with the organization).
2. MARPU (Marginal Average Revenue Per Unit): Revenue minus the cost
of providing the products and services used.
3. Customer profitability: Cost to manage is also taken into account.
4. Potential value: The expected profit a customer will generate through new
purchases.
5. LTV (Lifetime Value): Estimation of customer's future value which also takes
into account the customer's expected lifetime and potential value from new
purchases (LTV = customer present value + potential value).

As an example, let us consider Table 5.4, which presents a list of factors, costs,
and revenues that should contribute to the development of a MARPU index in
mobile telephony.

Table 5.4 Profitability factors in mobile telephony.

Factor Description MARPU contribution

Monthly access Monthly access fees +

Other one-off fees Fees that a subscriber pays once

(e.g., change of SIM card)

+

GSM revenue Revenue from GSM usage +

GPRS revenue Revenue from GPRS usage +

Other VAS revenue Revenue from other VAS +

Incoming revenue Revenue from incoming calls +

Volume discount Discount given to the

subscriber

−

Customer discount Discount given to the subscriber −

Interconnection costs Cost from interconnection costs

between operators

−

Termination costs Cost from termination costs to

same network

−

Roaming costs Cost from roaming calls −

Services costs Cost from services offered to

subscribers

−

Other dealer costs Money paid to other dealers −

A similar list of factors that should be taken into account in the development
of a MARPU index in banking is presented in Table 5.5.