If you’re building a lifetime annual P&L for a company, a good starting point would be answering the following questions:
● Expected year-on-year sales
● Cost of acquiring new customers and retaining existing customers
To answer the above questions, we would need to calculate the lifetime worth for each customer. To put it succinctly, customer lifetime value calculates the net present value over the lifetime of a customer’s relationship with the brand.
What does this mean for businesses?
As with any modelling techniques, understanding how customers engage with businesses is extremely important. A customer’s engagement can either be based on…