Part 1: Understanding Lifetime Value of Customers

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This is a simple business concept that is not necessarily that widely known. Intuitively we understand that customers that are loyal and keep coming back are the heart of business. However when was the last time you quantified this value? When you take a look at the numbers if becomes clear that managing customers as real assets is a powerful way to grow profitably.

Take the following chart for example:


You can see that if you provide a product or service with real tangible value to customers they will not only buy more from you but tell everyone they know to buy more from you. They also tend to be more interested in other products and services you offer. Plus as they become familiar with you it costs you less to service their business as they know how you operate.

The very best modern example of this on a mass scale is Apple, customers are attracted by the iPod, transition to an iPhone and or an iPad then get interested in a Mac computer… a virtuous cycle that has seen Apple’s revenue and profit grow exponentially over the past 5 years with no signs of slowing.

In the next post we will take a look at how you can calculate this for yourself.

Republished with author's permission from original post.

Christopher Brown
Chris Brown is the CEO of MarketCulture Strategies, the global leader in assessing the market-centricity of an organization and its degree of focus on customers, competitors and environmental conditions that impact business performance. MCS works closely with the C-Suite and other consulting groups to focus and adjust corporate vision and values around the right set of beliefs, behaviors and processes to engender more dynamic organizations, predictable growth, and customer lifetime value. In short we help leaders profit from increased customer focus.

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