Marketing Analysis Toolkit: Customer Lifetime Value Analysis

Harvard Business School Case 511-029

Courseware # 511-702

This courseware was prepared by Professors Thomas J. Steenburgh and Jill Avery (Simmons School of
Management) solely as the basis for class discussion. Cases are not intended to serve as endorsements,
sources of primary data, or illustrations of effective or ineffective management. Copyright © 2010 President
and Fellows of Harvard College. This publication may not be digitized, photocopied, or otherwise reproduced,
posted, or transmitted, without the permission of Harvard Business School.
 Customer Lifetime Value
Analysis Quantitative Toolkit

This toolkit is designed to accompany the Harvard Business School note, No. 9-511-029, entitled "Marketing Analysis Toolkit:
Customer Lifetime Value Analysis".

Using the CLV Excel Models

Two models are offered - a simple one that ignores the time value of money and a more advanced one that
includes the time value of money. Either of the models can use years of purchasing life, churn rate, or retention
rate to calculate the customer lifetime value.

There are two sections in each model: an input section and an output section. In the input section, you need
to input your model assumptions, providing values for the annual contribution margin, years of purchasing life,
churn rate, or retention rate, customer acquisition cost, and discount rate (advanced model only).

The output section automatically calculates values for you -- do not enter anything into the yellow cells as
they contain formulas. The output section calculates the customer lifetime value. Depending on which value
you enter, the output section calculates the years of purchasing life, churn rate, and retention rate.

Once you become more comfortable with running CLV analyses, try building your own Excel models to calculate CLV.

The spreadsheets entitled Table-Graph contain a data table and a graph which help illustrate what customer lifetime value
represents. Both the Table and the Graph automatically populate when you enter values in the input section of the Excel
model. Do not enter or change anything in the Table or Graph.

The Table shows you the Expected Contribution Margin, (Discounted Expected Contribution Margin in the advanced model)
for each year of the customer's life.

The Graph shows you the data from the Table represented in a bar graph, so that you can see how annual margins and
acquisition costs are realized over the customer's lifetime.

Professor Thomas Steenburgh and Professor Jill Avery (Simmons School of Management) developed this toolkit. HBS Toolkits
are developed solely as the basis for class discussion and are not intended to serve as endorsements, sources of primary data,
or illustrations of effective or ineffective management.

Copyright © 2010 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call
1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part
of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any
means --electronic, mechanical, photocopying, recording or otherwise -- without the permission of Harvard Business School.
 Customer Lifetime Value
Analysis Quantitative Toolkit

Introduction
First, try completing the sample problem below using pencil and paper. Use the mathematical formulas summarized in the
Introduction to the toolkit to solve for the answer. Then, try completing the sample probem using the Simple Prebuilt Excel
Model. In the input section, enter the data contained in the sample problem. Analyze the results that appear in the
output section to see if they match the answer you calculated in the first step. Look at the tables and graphs that are
generated to visualize your results.

Sample Problem
Tess is the development manager for the Isabelle Stewart Gardner Museum in Boston. She was in the middle of a
large campaign to raise $50 million for a building expansion project. Her development budget was tight and Tess
knew that she needed to attract the right kind of donor to the campaign. She was trying to decide which type of
donor to cultivate.

Her first choice was a younger, arts active woman living in Boston. This type of woman was likely to give in smaller increments,
about $500 per year, but, given her young age, could be expected to donate to the museum for the next 15 years.

Her other choice was an elderly, charitably inclined, suburban woman. This type of woman gave big gifts, on average around
$10,000 per year, but only could be counted on to give to the museum for 3 years.

A younger woman was easier to acquire as a donor; Tess just had to invite her to a black tie event which
cost the museum $100 per person and then she would become a donor. An older woman was much more
expensive to acquire; Tess had to personally cultivate her, with dinners, special tours with curators,
and special events, which cost the museum $5,000 per person. For every donation dollar received, Tess expends $0.15
in variable costs. Given her tight development budget, Tess knew she could only target one group. Who should
she target and why? What is the customer lifetime value of a younger woman? What is the customer lifetime value
of an older woman? If Tess has unlimited resources, should she target both types of women? Why or why not?
How much should Tess be willing to spend to acquire a younger woman donor? How much should Tess be willing to
spend to acquire an older woman donor?

Solution
Pen and Pencil Solution
If we want to use the customer lifetime value formula, we need to know (or make assumptions for) three pieces of data:
1.) annual profit per donor, 2.) the cost to acquire the donor, and 3.) either the years of purchasing life, churn rate, or
retention rate.

The sample problem provides us with information we can use to calculate annual profit per donor.

Younger donors contribute $500 per year. Think of this as revenue coming into the firm. For each of these
dollars, Tess expends $0.15 in variable costs for a total of $75 per year. So, the annual profit Tess receives
from a younger donor is $500 - $75 = $425 per year.

Older donors contribute $10,000 per year. For each of these dollars, Tess expends $0.15 in variable costs for a
total of $1,500 per year. So, the annual profit Tess receives from an older donor is $10,000 - $1,500 =
$8,500 per year.

The sample problem also provides us with information on the number of years customer donate: 15 for younger donors
and 3 for older donors.

The sample problem also provides us with information about the acquisition cost of each type of donor: $100 for
younger donors and $5,000 for older donors.

Using this data, we can use the mathematical formula to calculate the CLV of each type of donor:

CLV (younger) = ($425 * 15) - $100 = $6,275

CLV (older) = ($8,500 * 3) - $5,000 = $20,500

So, over her lifetime of giving, a younger donor is worth $6,275 to the museum, while an older donor is worth
$20,500. If her goal is to maximize CLV, then she should allocate her development budget to acquiring
older donors.

If her development budget was unlimited, Tess should target both types of donors, because both have positive
CLV's. She should be willing to spend up to $6,275 to acquire a younger donor and up to $20,500 to
acquire an older donor.

Prebuilt Excel Model Solution

Below is a picture of what the prebuilt model input and output sections should be for the solution. The inputs are
annual contribution margin received by the firm ($425 younger/$8,500 older), years of purchasing life (15 younger,
3 older), and acquisition costs ($100 younger/$5,000 older)
 Younger Donor Solution:

Input Section
Directions: In this section, you must input values to run the model. Values must be inputted into all cells
that are boxed in blue like this: in order for the model to run. The values that are in the model
currently are just random numbers. If you are confused about what to enter in each cell, run your mouse over
the red celltip for an explanation.

Annual contribution margin $ 425.00

Acquisition costs (AC) $ 100.00

Please enter a value for one of the following three metrics, leaving the other two blank:

Expected years of purchasing life (L) 15

Annual churn rate (CR)

Annual retention rate (RR)

Output Section
Directions: In this section, the model automatically calculates the customer lifetime value for you. It also
calculates the years of purchasing life, the annual churn rate, and the annual retention rate which are used to
calculate CLV. Remember, do not type anything into any of the cells in the output section that are filled in yellow
like this: as they contain formulas. If you would like an explanation of the formula which is being
calculated, run your mouse over the red celltip.

Expected years of purchasing life (L) 15.00

Annual churn rate (CR) 0.07

Annual retention rate (RR) 0.93

Customer Lifetime Value (CLV) $ 6,275.00

Older Donor Solution:

Input Section
Directions: In this section, you must input values to run the model. Values must be inputted into all cells
that are boxed in blue like this: in order for the model to run. The values that are in the model
currently are just random numbers. If you are confused about what to enter in each cell, run your mouse over
the red celltip for an explanation.

Annual contribution margin $ 8,500.00

Acquisition costs (AC) $ 5,000.00

Please enter a value for one of the following three metrics, leaving the other two blank:

Expected years of purchasing life (L) 3

Annual churn rate (CR)

Annual retention rate (RR)

Output Section
Directions: In this section, the model automatically calculates the customer lifetime value for you. It also
calculates the years of purchasing life, the annual churn rate, and the annual retention rate which are used to
calculate CLV. Remember, do not type anything into any of the cells in the output section that are filled in yellow
like this: as they contain formulas. If you would like an explanation of the formula which is being
calculated, run your mouse over the red celltip.

Expected years of purchasing life (L) 3.00

Annual churn rate (CR) 0.33

Annual retention rate (RR) 0.67

Customer Lifetime Value (CLV) $ 20,500.00

Professor Thomas Steenburgh and Professor Jill Avery (Simmons School of Management) developed this toolkit. HBS Toolkits
are developed solely as the basis for class discussion and are not intended to serve as endorsements, sources of primary data,
or illustrations of effective or ineffective management.

Copyright © 2010 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call
1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part
of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any
means --electronic, mechanical, photocopying, recording or otherwise -- without the permission of Harvard Business School.
 Customer Lifetime Value
Analysis Quantitative Toolkit

This is the SIMPLE MODEL which calculates CLV using the years of purchasing life, churn rate, or retention rate, and ignores the time
value of money.

Input Section
Directions: In this section, you must input values to run the model. Values must be inputted into all cells
that are boxed in blue like this: in order for the model to run. The values that are in the model
currently are just random numbers. If you are confused about what to enter in each cell, run your mouse over
the red celltip for an explanation.

Annual contribution margin $ 50.00

Acquisition costs (AC) $ 20.00

Please enter a value for one of the following three metrics, leaving the other two blank:

Expected years of purchasing life (L) 10

Annual churn rate (CR)

Annual retention rate (RR)

Output Section
Directions: In this section, the model automatically calculates the customer lifetime value for you. It also
calculates the years of purchasing life, the annual churn rate, and the annual retention rate which are used to
calculate CLV. Remember, do not type anything into any of the cells in the output section that are filled in yellow
like this: as they contain formulas. If you would like an explanation of the formula which is being
calculated, run your mouse over the red celltip.

Expected years of purchasing life (L) 10.00

Annual churn rate (CR) 0.10

Annual retention rate (RR) 0.90

Customer Lifetime Value (CLV) $ 480.00

Analyzing Your Results

Now that you have calculated the customer lifetime value for the customer, you are ready to assess
her worth to the firm. The first thing you should look at is whether the customer generates a positive
or negative CLV. Customers with a negative CLV are not worth the firm's investment; these are customers
who cost the firm more to acquire than they are worth. Customers with a positive CLV are worthy of
investment; these are customers who generate more profits for the firm than the cost of acquiring them.

You can also use the calculated CLV to estimate the value of a customer segment. Use the CLV
calculator to generate an average CLV for a typical customer in the segment. Then, multiply the
average CLV of a customer by the number of customers in that segment to obtain the CLV of the entire
segment. You can use this to compare the CLV of one customer segment to another.

You can also use the CLV to estimate how much to spend to acquire a customer. Put a zero in the
acquisition cost box and run the model. The calculated CLV will tell you the maximum you can spend to
acquire the customer.

Visualizing Your Results

Use the Table and Graph on the next spreadsheet to help you visualize your results.

Professor Thomas Steenburgh and Professor Jill Avery (Simmons School of Management) developed this toolkit. HBS Toolkits
are developed solely as the basis for class discussion and are not intended to serve as endorsements, sources of primary data,
or illustrations of effective or ineffective management.

Copyright © 2010 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call
1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part
of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any
means --electronic, mechanical, photocopying, recording or otherwise -- without the permission of Harvard Business School.
 Customer Lifetime Value
Analysis Quantitative Toolkit

Customer Lifetime Value Table

This table automatically populates based on the values you entered into the Excel Simple Model. It shows you the
Expected Contribution Margin for each year of the customer's lifetime.

The CLV calculation sums the expected contribution margins from each year.

Year Expected Contribution Margin Acquisition Cost

1 $ 50.00 -$20.00
2 $ 45.00
3 $ 40.50
4 $ 36.45
5 $ 32.81
6 $ 29.52
7 $ 26.57
8 $ 23.91
9 $ 21.52
10 $ 19.37
11 $ 17.43
12 $ 15.69
13 $ 14.12
14 $ 12.71
15 $ 11.44
16 $ 10.29
17 $ 9.27
18 $ 8.34
19 $ 7.50
20 $ 6.75
21 $ 6.08
22 $ 5.47
23 $ 4.92
24 $ 4.43
25 $ 3.99
all values of t > 25 $ 35.89

CLV $ 480.00

Customer Lifetime Value Graph

This graph automatically populates based on the values you entered into the Excel Simple Model. It shows you the
profit inflows and cost outflows the firm anticipates from the customer over her lifetime.

$60

$50
Dollars

$40

$30

$20

$10

$0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
-$10

-$20

-$30 Year

Expected Annual Contribution Margin Acquisition Costs

Professor Thomas Steenburgh and Professor Jill Avery (Simmons School of Management) developed this toolkit. HBS Toolkits
are developed solely as the basis for class discussion and are not intended to serve as endorsements, sources of primary data,
or illustrations of effective or ineffective management.
Copyright © 2010 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call
1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part
of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any
means --electronic, mechanical, photocopying, recording or otherwise -- without the permission of Harvard Business School.
 Customer Lifetime Value
Analysis Quantitative Toolkit

This is the ADVANCED MODEL which calculates CLV using the years of purchasing life, churn rate, or retention rate, and includes
the time value of money.

Input Section
Directions: In this section, you must input values to run the model. Values must be inputted into all cells
that are boxed in blue like this: in order for the model to run. The values that are in the model
currently are just random numbers. If you are confused about what to enter in each cell, run your mouse over
the red celltip for an explanation.

Annual contribution margin $ 50.00

Firm Discount Rate per year (i) 12%

Acquisition costs (AC) $20.00

Please enter a value for one of the following three metrics, leaving the other two blank:

Years of purchasing life (L)

Churn rate (CR) 10%

Retention rate (RR)

Output Section
Directions: In this section, the model automatically calculates the customer lifetime value for you. It also
calculates contribution margin per unit, and annual revenue, annual variable costs, and annual contribution
margin. Remember, do not type anything into any of the cells in the output section that are filled in yellow
like this: as they contain formulas. If you would like an explanation of the formula which is being
calculated, run your mouse over the red celltip.

Years of purchasing life (L) 10.00

Churn rate (CR) 0.10

Retention rate (RR) 0.90

Customer Lifetime Value (CLV) $ 234.55

Note: This CLV calculation assumes 1.) the time horizon is infinite, 2.) the same margins are received every year
from customers, and 3.) the retention rate is constant.

Analyzing Your Results

Now that you have calculated the customer lifetime value for the customer, you are ready to assess
her worth to the firm. The first thing you should look at is whether the customer generates a positive
or negative CLV. Customers with a negative CLV are not worth the firm's investment; these are customers
who cost the firm more to acquire than they are worth. Customers with a positive CLV are worthy of
investment; these are customers who generate more profits for the firm than the cost of acquiring them.

You can also use the calculated CLV to estimate the value of a customer segment. Use the CLV
calculator to generate an average CLV for a typical customer in the segment. Then, multiply the
average CLV of a customer by the number of customers in that segment to obtain the CLV of the entire
segment. You can use this to compare the CLV of one customer segment to another.

You can also use the CLV to estimate how much to spend to acquire a customer. Put a zero in the
acquisition cost box and run the model. The calculated CLV will tell you the maximum you can spend to
acquire the customer.

Visualizing Your Results

Use the Table and Graph on the next spreadsheet to help you visualize your results.

Professor Thomas Steenburgh and Professor Jill Avery (Simmons School of Management) developed this toolkit. HBS Toolkits
are developed solely as the basis for class discussion and are not intended to serve as endorsements, sources of primary data,
or illustrations of effective or ineffective management.

Copyright © 2010 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call
1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part
of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any
means --electronic, mechanical, photocopying, recording or otherwise -- without the permission of Harvard Business School.
 Customer Lifetime Value
Analysis Quantitative Toolkit

Customer Lifetime Value Table

This table automatically populates based on the values you entered into the Excel Advanced Model. It shows you the
Expected Annual Contribution Margin, the Discount Factor, the Discounted Expected Contribution Margin, and Acquisition
Cost of the customer.

The CLV calculation sums the discounted expected contribution margins over the series and subtracts the
acquisition cost.

Expected Discounted Expected

Year Contribution Margin Discount Factor Contribution Margin Acquisition Cost
1 $50.00 1.00 $50.00 -$20.00
2 $45.00 0.89 $40.18
3 $40.50 0.80 $32.29
4 $36.45 0.71 $25.94
5 $32.81 0.64 $20.85
6 $29.52 0.57 $16.75
7 $26.57 0.51 $13.46
8 $23.91 0.45 $10.82
9 $21.52 0.40 $8.69
10 $19.37 0.36 $6.99
11 $17.43 0.32 $5.61
12 $15.69 0.29 $4.51
13 $14.12 0.26 $3.62
14 $12.71 0.23 $2.91
15 $11.44 0.20 $2.34
16 $10.29 0.18 $1.88
17 $9.27 0.16 $1.51
18 $8.34 0.15 $1.21
19 $7.50 0.13 $0.98
20 $6.75 0.12 $0.78
21 $6.08 0.10 $0.63
22 $5.47 0.09 $0.51
23 $4.92 0.08 $0.41
24 $4.43 0.07 $0.33
25 $3.99 0.07 $0.26
all values of t > 25 $1.07

CLV $234.55

Customer Lifetime Value Graph

This graph automatically populates based on the values you entered into the Excel Advanced Model. It shows you the
profit inflows and cost outflows the firm anticipates from the customer over her lifetime.

$60

$50
Dollars

$40

$30

$20

$10

$0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
-$10

-$20

-$30 Year

Discounted Expected Annual Contribution Margin Acquisition Costs

Professor Thomas Steenburgh and Professor Jill Avery (Simmons School of Management) developed this toolkit. HBS Toolkits
are developed solely as the basis for class discussion and are not intended to serve as endorsements, sources of primary data,
or illustrations of effective or ineffective management.

Copyright © 2010 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call
1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part
of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any
means --electronic, mechanical, photocopying, recording or otherwise -- without the permission of Harvard Business School.
Introduction
Strong marketers combine creative thinking with rigorous quantitative analysis to make com

These online quantitative toolkits were designed to help facilitate the quantitative analyses
marketing decision making. There are five toolkits, each focusing on a particular type of q

Situation Analysis
Breakeven Analysis
Customer Lifetime Value Analysis
Market Size and Market Share Analysis
Pricing and Profitability Analysis

Toolkit Contents
Each toolkit contains an Introduction which explains the analytical concept, explores how
making, and shows in words, mathematical formulas, and concrete examples how to calcu
should carefully review the Introduction so that you are familiar with the analysis, how it is
when it is used in marketing. The Introduction is contained in the first spreadsheet within t

The second spreadsheet within each toolkit contains a Sample Problem

concept, shows you the solution using pen and paper methods, and then shows you how t
Excel model to yield the solution.

Once you have grasped the analytical concept, you are ready to explore the
accompany each toolkit. These models are designed to do the calculations for you. Each

In the Input Section, you will need to input various pieces of data to be analyz
put into each of the cells in the Input Section in order for the model to run. For
be asked to input the price of the product, the variable costs of the product, the
the acquisition cost of a customer, the total number of customer in a market, et
model's "assumptions" which drive the calculations and are usually found in the

Once all of the input values are inputted, the model is ready to go to work. Pre
Output Section automatically calculate key components of the quantitative ana
of the output sections calculate Total Revenue, Total Costs, and Total Profits.
Sections calculates the final answer; for example, the Breakeven Analysis toolk
breakeven quantity, the Customer Lifetime Value Analysis toolkits' model calcu
 It is important that you do not enter values into the Output Section of the mode
formulas that run the analysis. Cells containing prebuilt formulas are colored
always avoid changing anything in a yellow cell.

Note: the values contained in the Excel model Input Section are random values. You sho
before using the tool to solve a problem.

The Prebuilt Excel Spreadsheet Models are contained in the third spreadsheet within the t

Some of the toolkits contain Graphs and Tables which help illuminate the analytical conce
your answers in context. The Graphs and Tables automatically create themselves once da
You should avoid entering anything into the Graphs and Tables spreadsheet, as this may
that create the Graphs and Tables. The Graphs and Tables spreadsheets are contained i
Excel Spreadsheet Models within the toolkit.

The final spreadsheet in each toolkit is this Toolkit Help page. You may refer to this guide
understanding how to use the toolkit.

Using the Toolkits

Each of the Prebuilt Excel Spreadsheet Models is built in Excel, so you need to be familiar
beginning to use the toolkits. The basic Excel operations that are needed to use the toolki
are not familiar with these operations, you should use the Help tab in your Excel software t

File Open and Save

You can download the toolkits directly into Excel.

Important Note: All of the toolkits contain a prebuilt Excel model. Any changes you make t
once you save the file. To maintain the integrity of the prebuilt model, save the toolkit to yo
are ready to run an analysis, open the toolkit file and immediately save it with another nam
calculate your results.

Using Multiple Spreadsheets within a File

Each toolkit contains multiple spreadsheets within it, as outlined above. You can switch be
clicking on the appropriate spreadsheet on the bottom left hand side of the screen.

Entering Values into Cells

In the Input Sections of the toolkits, you will be asked to enter values in various cells. The
in the model calculations.

Using Cell References and Formulas

The Excel spreadsheet models in the toolkits are prebuilt, which means you do not need to
yourself; however, you should familiarize yourself with the formulas that are in the cells in t
so that you can create your own spreadsheet models and customize the analysis, as need

Print
The Output Section, graphs, and tables can be printed by highlighting the desired print are

Getting Help while in the Toolkit Models

 Each Prebuilt Excel Model features red celltip markers which contains information on what
and/or what the formula in the cell is calculating. These can help guide you through the to
information, place your mouse over the red celltip located on the top right hand corner of a

The red celltip marker looks like this (see below); run your mouse over it to see how it work

Professor Thomas Steenburgh and Professor Jill Avery (Simmons School of Management) developed
are developed solely as the basis for class discussion and are not intended to serve as endorsements
or illustrations of effective or ineffective management.

Copyright © 2010 President and Fellows of Harvard College. To order copies or request permission t
1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.h
of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmit
means --electronic, mechanical, photocopying, recording or otherwise -- without the permission of Har
 Quantitative Toolkit
How-To Guide

us quantitative analysis to make competent marketing decisions.

p facilitate the quantitative analyses that you will use to guide your
h focusing on a particular type of quantitative analysis:

he analytical concept, explores how it is used in marketing decision

nd concrete examples how to calculate the answer. To begin, you
familiar with the analysis, how it is calculated, and how and
ned in the first spreadsheet within the toolkit.

Sample Problem, which guides you through the analytical

methods, and then shows you how to populate the prebuilt

ready to explore the Prebuilt Excel Spreadsheet Models which

o do the calculations for you. Each model contains two sections:

various pieces of data to be analyzed. Values must be

n in order for the model to run. For example, you may
he variable costs of the product, the fixed costs of the product,
number of customer in a market, etc. These values are the
ulations and are usually found in the case exhibits or text.

e model is ready to go to work. Prebuilt formulas in the

components of the quantitative analysis. For example, some
ue, Total Costs, and Total Profits. Each of the models' Output
mple, the Breakeven Analysis toolkit's model calculates the
Value Analysis toolkits' model calculates the CLV of a customer.
nto the Output Section of the model, as this may overwrite
ning prebuilt formulas are colored yellow; you should

ection are random values. You should change these values

n the third spreadsheet within the toolkit.

help illuminate the analytical concept and help you visualize

matically create themselves once data is inputted into the Input Section.
d Tables spreadsheet, as this may overwrite necessary formulas
ables spreadsheets are contained in the spreadsheet after the Prebuilt

p page. You may refer to this guide if you are having trouble

in Excel, so you need to be familiar and facile with Excel before

ns that are needed to use the toolkits are as follows; if you
he Help tab in your Excel software to learn how to do them.

el model. Any changes you make to the file are permanent

prebuilt model, save the toolkit to your desktop. Then, when you
mmediately save it with another name so that you can

outlined above. You can switch between the spreadsheets by

eft hand side of the screen.

o enter values in various cells. These inputs will be used

ilt, which means you do not need to write Excel formulas

he formulas that are in the cells in the Output Section
nd customize the analysis, as needed.

by highlighting the desired print area.

 which contains information on what to enter into each cell
e can help guide you through the tool. To access the helpful
ed on the top right hand corner of a cell.

our mouse over it to see how it works.

School of Management) developed this toolkit. HBS Toolkits

intended to serve as endorsements, sources of primary data,

rder copies or request permission to reproduce materials, call

n, MA 02163, or go to http://www.hbsp.harvard.edu. No part
used in a spreadsheet, or transmitted in any form or by any
wise -- without the permission of Harvard Business School.