From the course: Building an Integrated Online Marketing Plan

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Measuring customer lifetime value

Measuring customer lifetime value

From the course: Building an Integrated Online Marketing Plan

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Measuring customer lifetime value

- [Instructor] When segmenting your customers, it's important to understand that not all of 'em are the same. Some are more profitable than others. It's important to understand who your best customers are and how much money do they spend? Now, when I say best customers, a lot of times people will define that differently. It could be based purely on profit or reliability or that they refer new business or simply based on their relationship. Based on the type of customer you're trying to produce, you need to have a method of measuring that. One way of measuring profitability is the RFM analysis: recency, frequency, and monetary. Recency, based on when was the last time they were at your business? Frequency, how often do they buy from you? And monetary, how much? This helps us to understand the customer lifetime value equation. The customer lifetime value is based on the average value of a sale, how many sales a customer makes, usually within a specific amount of time, a year or a month,…

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