Part 1: Understanding Lifetime Value of Customers

This is a simple business concept that is not necessarily that widely known. Intuitively we understand that customers that are loyal and keep coming back are the heart of business. However when was the last time you quantified this value? When you take a look at the numbers if becomes clear that managing customers as real assets is a powerful way to grow profitably.

Take the following chart for example:


You can see that if you provide a product or service with real tangible value to customers they will not only buy more from you but tell everyone they know to buy more from you. They also tend to be more interested in other products and services you offer. Plus as they become familiar with you it costs you less to service their business as they know how you operate.

The very best modern example of this on a mass scale is Apple, customers are attracted by the iPod, transition to an iPhone and or an iPad then get interested in a Mac computer… a virtuous cycle that has seen Apple’s revenue and profit grow exponentially over the past 5 years with no signs of slowing.

In the next post we will take a look at how you can calculate this for yourself.

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One response to “Part 1: Understanding Lifetime Value of Customers

  1. Pingback: Customer Metrics: Measure what matters most to customers | MarketCulture Blog – Using a Customer Culture for Competitive Advantage

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