2) Identify any product or service. How can a marketer calculate the lifetime value of a...

2) Identify any product or service. How can a marketer calculate the lifetime value of a customer relating to the purchase of this product or service? Explain your answer.

Expert Solution

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Question:

Answer:

Lifetime value of a customer:

Lifetime value of a customer is the total value of profit/revenue or amount of value a customer generate for the company during their relationship with the company. Or we can say that lifetime value of a customer is the total value a customer generate for a company over their lifetime.

There are number of method to calculate over their lifetime but simple formula is:

Lifetime value of a customer = Annual revenue per customer*Customer relation(in years) - Cost of acquiring a customer

Example: There a company XYZ Inc. and it is selling electronic items in the retail market. Company has acquired a customer Mr. John from the open market and spent $10 to acquired the customer. Mr. John generate revenue of $100 every year for next 5 years after that he never buy from XYZ Inc.

Lifetime value of a customer= $100*5 - 10 = $500 - $10 = $490

Lifetime value of a customer = $490

Thank You

Rahul Sunny answered 2 years ago

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