Customer-based Coportate Valuation for Orthofeet
Gradient developed a statistical Customer Lifetime Value (CLV) model for Orthofeet's direct-to-consumer (DTC) channels, leveraging historical transactional data to predict future customer behavior and financial forecasts.
Project Overview
Together with Orthofeet, we built a statistical Customer Lifetime Value (CLV) model for Orthofeet's direct-to-consumer (DTC) channels. The methodologies involved analyzing historical transactional data to predict future consumer behavior and understand the impact of various customer attributes on CLV. The three main methodology drivers were:
1. Projections based on historical transactional records: Future consumer behavior was projected by using historical customer transactional data from September 2015 to April 2022. This extensive dataset allowed for a robust understanding of past purchasing patterns to inform future predictions.
2. Driver analysis of customer attributes: We then analyzed the influence of specific customer attributes on CLV. This included examining how a customer's gender, the product category of their first purchase, and their acquisition channel impacted their lifetime value.
3. Financial forecasting and due diligence: The project included forecasting DTC sales, projecting over $600 million in the next four years. This financial projection, combined with the model's validation through a holdout test (showing only a 6.3% deficit between predicted and actual sales), provided a strong basis for financial due diligence.- Customer Lifetime Value
- Driver Analysis
- Financial Forecast
Each cohort acquired after 2020 is more valuable than the previous cohort by at least $10 increments, rising from $260 in 2020 to $325 at the end of 2023
The channel a customer came through has an impact on their expected LTV,
with Email and Remarketing capturing the highest LTV customers.
Forecasted sales follow a seasonal upward trend, breaching the $XXm per
month barrier for sales in 2026
Research Approach
Transactional History Deep Dive
Gradient took a deep dive in Orthofeets transactional history from September 2015 to April 2022. This extensive historical data allowed for the identification of trends and patterns in customer purchasing behavior over a significant period such as frequency and retention.
Customer Lifetime Value Model
Gradient built a proprietary statistical model specifically designed to calculate and predict CLV for Orthofeet's direct-to-consumer (DTC) channels. This model incorporated various statistical techniques to analyze past transactional data and identify patterns.
Corporate Valuation
Beyond just revenue, the CLV methodology extended to profitability. By incorporating Orthofeet's contribution margin and customer acquisition costs, we could determine when customers become profitable and the potential return on investment as well as global revenue forecasts.
