If you own a business, you’re aware that one customer differs from another in several ways. For instance, your customer may be a consumer, retailer, wholesaler, or purchasing department. What’s more, the budgets, frequency of purchases, and product or service requirements of each buyer within each of those groups vary. For example, one customer may limit her purchases to designer brands, while another buys only house brands.
Consequently, knowing which customers to focus on and invest in is essential to your efforts to maximize profit. In part, you can answer this question using customer lifetime value figures.
You calculate one customer lifetime value (CLV) and then compare that figure to the CLV of other customers. (You can use a tool for this process.) These calculations and comparisons can guide your marketing and sales decisions and those of other functions touched by customer value considerations.