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How to calculate the lifetime value of a customer

Crunch the numbers to decide how much you are willing to spend to secure a customer for life.

Some seasoned entrepreneurs may say “break even” or some other number is the most important metric, but I believe “lifetime value” is perhaps the most significant measure to benchmark. I also know it’s one of the most overlooked and least understood metrics in business – even though it’s one of the easiest to figure out.

Why is this particular number so important? Mainly because it will give you an idea of how much repeat business you can expect from a particular customer, which in turn will help you decide how much you’re willing to spend to “buy” that customer for your business.

Once you know how frequently a customer buys and how much he or she spends, you will better understand how to allocate your resources in terms of customer retention programs and other services you’ll need to keep your customers – and keep them happy.

…to read this article in full, visit leading US entrepreneurial resource, Entrepreneur.com

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Entrepreneur.com

Entrepreneur.com

Entrepreneur Magazine has been inspiring, informing and celebrating entrepreneurs since 1973. Entrepreneur.com offers real solutions to the challenges faced by entrepreneurs, including tips, tools and insider news to help build – and grow – businesses.

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