What Is Customer Lifetime Value? Essay

1833 WordsOct 8, 20168 Pages
Discussion 1 • What is Customer Lifetime Value? Customer Lifetime Value is a metric used in marketing that represents the total net profit a company will gain from any given customer (Rouse, 2016). A company can describe a profitable customer as “a person, household, or company whose revenues over time exceed, by an acceptable amount, the company costs of attracting, selling, and servicing that customer” (Berger & Nasr, 1998). The customer’s revenue that is excess is considered to be the customer lifetime value (Berger & Nasr, 1998). • Describe a situation where a company should focus on CLV to cultivate their customer relationships. One of the ways that companies make huge decisions based on product selection etc. is through the use of forecasting their customer response to proposed changes. The customer base and their overall profitability is what bring in revenue for the company. The consequence of increased or decreased customer satisfaction must be considered, as it would have a direct impact on the overall customer retention rate for the company. Companies must be able to predict the consequences, whether negative or positive, of certain proposed actions to ensure that the company is able to retain its customers. The company must focus directly on the CLV to enhance customer relationships during company propositions for change to, at the very least, maintain its profitability of its customers. It allows the company to strategize and make decisions to keep customers
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