What is one customer worth to a business, and what should a business be willing to pay to acquire the said customer?
It all comes down to a concept called “customer lifetime value”, which is used to describe the approximate value of one customer to a business. It is essentially the average amount of money made over the lifespan of an average customer, discounted by future cash flows.
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Calculating The Lifetime Value Of A Customer
Original graphic by: KISSmetrics