If the annual discount rate is 10%, what is the discount rate between purchase occasions that could be used to calculate the customer lifetime value of a newly acquired customer?


That’s right! In the Appendix, Ron explains that because the average interpurchase time between purchase occasions in the case data is about three weeks, the relevant discount rate can be approximated by dividing the annual rate by about 17. The annual rate (a) can be precisely converted to the three-week rate using the formula i = (1 + a) ^1/17.33 – 1.