FORECASTING CUSTOMER LIFETIME VALUE IN THE BANKING INDUSTRY

Abstract

This research investigates the predictive factors influencing customer lifetime value within the banking sector, specifically targeting loan users at the Commercial Bank of Ethiopia in Hossana Town. It evaluates strategies employed by banks, predicts customer lifetime value through financial metrics, and analyzes socio-demographic factors influencing customer behavior.  The research design utilizes primary data from in-depth interviews with branch managers and secondary data from loan account statements. The analysis uses multiple regression techniques to forecast and explore relationships between independent variables and customer lifetime value. Results show a positive correlation between age, income, occupation, interest rate, and customer tenure. These findings indicate the importance of demographic and economic factors in customer relationships. Recommendations emphasize implementing targeted marketing, strengthening customer relationship management, and leveraging feedback mechanisms to improve service offerings. By adopting these strategies, banks should better align their operations with customer needs, maximizing lifetime value and developing long-term profitability.