Customer lifetime value
One useful way of thinking about your customers is as an investment: you invest in them early on, to attract their custom and to generate loyalty, then over time you recoup that investment with a steady flow of sales. Customer lifetime value is a way of modelling this concept in a quantitative way. It has important implications for how you allocate resources at different stages in your relationship with customers.
When to use it
- To estimate the potential future value of your customers.
- To decide how much to invest in customer loyalty programmes and customer relationship management systems.
- To make corrections if you are losing customers.
The notion of customer lifetime value was developed in the late ...