Know-How Exchange : Social Media

The total value of net income from an individual customer over time. Eg a baker earns $1 of net income from one particular customer per day. That's $365 per year. Over ten years $3650 etc. For a car dealer it might be the net income from selling a car plus the later servicing income, purchase of replacement parts etc.

It's the total worth, to you, of a customer, for the time that person buys from you. It includes the people that the person refers to you and the total of their combined buys.

here's a link to some information from Wikipedia:
https://en.wikipedia.org/wiki/Customer_lifetime_value

This is a very important concept, because without knowing the lifetime value of a new customer, you can't determine how much you should be willing to spend to acquire a new customer. Further, you can segment your customer base based on lifetime value, so that you spend more to acquire customers who are worth more.

Companies who spend without knowing the lifetime value of a customer are almost certain to be spending too much or too little ... but they'll never know which.

I concur with Gary that it should also include the additional referrals and related income from that customer, not just solely on the specific customer. For example, you might invest heavily in High Influencers, who themselves may not generate profit for you, but they will spread word-of-mouth and on-line viral marketing at a low cost to you but a long-term profit for your brand.

Again, per Goodman's advice, you'll have to segment your target customers to identify how you will invest in each segment (or not).

The Customer Lifetime Value (CLV) is, simply put, what is a customer worth to your business for their entire engagement, not just one stage of their interactions. Many companies focus on hot areas such as conversion rate optimisation and landing page personalisation when each and everyone of those pieces are a part of the real 'whole' value.

There is a really great information piece yesterday on Marketing Profs focusing on the Single View of the customer - https://www.marketingprofs.com/opinions/2014/24873/why-your-business-needs-.... This is a great strategic approach to defining and catering to the CLV. Also - we put out a study with eConsultancy just last week that could be an excellent resource: https://siteco.re/1jAR9yT

Both are excellent resources for learning more about the value and how to manage, measure and optimise that value.