On Matters of Customer Lifetime Value

In a previous article, reference was made to an organizational chart that had customers at the very top of the chart. Customers are the lifeblood of any business and with the progression of time, it has become possible for businesses to gain advanced insight into the length of time customers are to be kept before becoming profitable and what their likely long-term value is.

In an article on Alta, the Alta Team, recognizing that “customers are everything,” educates us on the use of predictive customer lifetime value to empower businesses. Customer lifetime value is equal to the present value of prospective cash flows. It can also be defined as the specific value of business that is attached to a certain customer for the entire duration of his or her relationship with the business. It gives a reasonable estimate of how long a customer will remain with the business and helps business leaders to arrive at shrewd sales and marketing decisions.

Predictive customer lifetime value is an approach that allows businesses to develop a pattern of the unique purchasing behavior of each customer so they can estimate what that customer’s future buying behavior will be. It uses a complex body of current analytical data which predominantly pertain to how frequently the customer makes a purchase.

Predictive customer lifetime value is applicable in many ways. It’s a valuable guide for acquisitions as it allows businesses to better target and prioritize prospects that place a high value on customer service. The value that a prospective acquisition places on customer service represent tremendous future lifetime value. Additionally, by knowing the value of a customer, businesses can craft and execute a plan to enhance customer engagement, which will result in the increased value of existing customers.

If you want to be in the know of predicting customer lifetime value for the ultimate success of your business, eCornell’s program in Marketing Analytics is available to help you achieve that goal in an Ivy League setting.

eCornell courses are approved by SkillsFuture Singapore for SkillsFuture Credit as well as by HRDF Malaysia under its SBL Scheme.