

Algorithmically Determining a Customer's Value - python_kiss
http://jawadonweb.com/?p=1942&

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mooism2
I have problems with that equation.

First, log10 (totalC / totalA) = log10 totalC - log10 totalA. As totalA is
constant across customers, we can discard that term. (And think about it: why
would a £100/year customer be worth less to you if you had twice as much
revenue coming in from other sources?)

Next, the frequency / recency term. "recency" is defined as time since last
purchase, so (a) is this measured in days, months, seconds, what? And (b) if
your customer is buying from you right now this second, you're dividing by
zero and your customer is worth more to you than all the footballers in
Europe.

Finally, he doesn't attempt to justify this equation. There's no explanation
of what the terms are supposed to mean. It doesn't seem to make sense from a
dimensional analysis viewpoint.

