Customer lifetime value
Key performance question this indicator helps to answer
How well do we understand the financial value from our customer relationships?
Why is this indicator important?
Some of your customers might not be profitable in the beginning or might be expensive to acquire but could become more profitable as the relationship continues. Just think about banking as an example. Others might only become profitable after a certain length of time of being a customer (think of mobile phone contracts which initially subsidise handsets and recoup the money over time).
Customer lifetime value (CLV) is a measure that combines (1) the anticipated length of the relationship between the supplier ...