Calculating Customer Lifetime Value Is Tricky

A customer’s lifetime value is more important for an organization than the profits on the first, or perhaps even the first several sales.

Many companies offer discounts — sometimes steep ones — to obtain the customer’s initial business. Some may even make the first sale at a loss, with the idea of making it up on subsequent sales. But to determine if a discount will pay off in the future, a company needs to know how to accurately calculate customer lifetime value (CLTV). It’s not as easy as it might first seem.

Attracting and retaining the highest value customers is key for every business. Knowing your customer’s lifetime value can help you make sound marketing decisions.

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