Creating long-term loyalty relationships - Maximizing customer lifetime value
5 important questions on Creating long-term loyalty relationships - Maximizing customer lifetime value
What does the well-known 80-20 rule state?
What is a profitable customer?
Explain customer profitability analysis
- Customer 1 is very profitable. He buys P1 and P2 which are both profit-making products.
- Customer 2 yields mixed profitability. He buys P1 (profitable) and P3 (unprofitable).
- Customer 3 is a losing customer. He buys P1 (proftable), but also P3 and P4 (both unprofitable).
What can a company do about customer 2 and 3?
- Raise the price of its less profitable products or eliminate them.
- Try to sell customers 2 and 3 its profit making products.
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CPA is best conducted with the tools of an accounting technique called ABC (activity-based costing)? What is abc?
What is customer lifetime value (CLV)?
- Customer lifetime value describes the net present value of the stream of future profits expected over the customer's lifetime purchases.
- The company must subtract from its expected revenues the expected costs of attracting, selling, and servicing the account of that customer, applying the appropriate discount rate.
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