Lifetime Value (or value of a customer) is the total profit that a customer will bring you. Not the volume, but the net dollars (net present value) during their relationship with you.

The primary purpose of calculating the value of your customer is to measure the success of your acquisition tools and tell you when it's worth it to acquire additional customers. When you're talking about customers for this purpose you're talking about average customers. In conjunction with LTV, you need to know your attrition rates, retention rates and repeat business rates for that same average customer.


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