Calculating the Lifetime Value of a Customer

Visual Capitalist |

Courtesy of: Visual Capitalist

What is one customer worth to a business, and what should a business be willing to pay to acquire the said customer?



It all comes down to a concept called “customer lifetime value”, which is used to describe the approximate value of one customer to a business. It is essentially the average amount of money made over the lifespan of an average customer, discounted by future cash flows.

The higher the value, the higher the marketing budget can be to acquire each customer. This is not only a key concept to understand in business, but also for investors that are looking to put money in consumer-oriented companies.

Original graphic by: KISSmetrics

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Comments

Emerging Growth

Viking Energy Group Inc

Viking Investments Group Inc provides professional advisory and consulting services to companies undergoing or anticipating periods of rapid growth, change or ownership transition.

Private Markets

Mesa-Marshall 2 Well Project

MESA Resources ("MESA") is sponsoring the development of the two well direct drilling project -- "Mesa-Marshall #1-2". MESA, founded in 1992, is engaged in the acquisition, exploration and development of…

California Green Tree Development

California Green Tree Development LLC (CGTD) is a for-profit LLC that plans on using California’s booming market of legal cannabis products for medical purposes. As an unprecedented resource, Cannabis has…