CLV than the other). Yet our analysis shows that even when products are similar in terms of their profitability drivers, firms may still have a motivation to transfer customers. A Platform Benefit Model We use a fundamental approach to CLV modeling, where the CLV of an individual can be represented as (1) , which in the case of infinite horizon, sums to (2) . Whereby r is the individual-level retention probability per period t; P is a fixed gross profit per period; and d is the discount rate (Kumar and Pansari 2015; Kumar, Ramani, and Bohling 2004). We consider a two-product platform in which Product 1 is introduced at Period 1 and continues after the introduction of Product 2 that occurs at Period T+1. Thus, before Period T, only one product is available that belongs to the platform, while from Period T+1 onwards, two products are available (see Figure 1). Figure 1: Product Platform with two Games We assume that between = 1 and = customers of Product 1 can only externally t t T, (out of the platform), while from period = onwards, customers of Product 1 can churn t T+1 externally (out of the platform) and internally (to Product 2). Customers of Product 2 can churn externally only, as we do not include a third product in the platform. That being said, it is straightforward to construct a multi-product platform along the same lines see mutatis mutandis –
CLV than the other). Yet our analysis shows that even when products are similar in terms of their profitability drivers, firms may still have a motivation to transfer customers. A Platform Benefit Model We use a fundamental approach to CLV modeling, where the CLV of an individual can be represented as (1) , which in the case of infinite horizon, sums to (2) . Whereby r is the individual-level retention probability per period t; P is a fixed gross profit per period; and d is the discount rate (Kumar and Pansari 2015; Kumar, Ramani, and Bohling 2004). We consider a two-product platform in which Product 1 is introduced at Period 1 and continues after the introduction of Product 2 that occurs at Period T+1. Thus, before Period T, only one product is available that belongs to the platform, while from Period T+1 onwards, two products are available (see Figure 1). Figure 1: Product Platform with two Games We assume that between t = 1 and t = T, customers of Product 1 can only externally (out of the platform), while from period t = T+1 onwards, customers of Product 1 can churn externally (out of the platform) and internally (to Product 2). Customers of Product 2 can churn externally only, as we do not include a third product in the platform. That being said, it is straightforward to construct a multi-product platform along the same lines mutatis mutandis – see
Customer%20Retention%20in%20a%20Platform%20World%20Dec%202017%20final%20a%20-%20revised-1.docx