Explain the concept of customer lifetime value (CLV) and its significance in business.
- Calculate the total revenue from a single transaction
- Disregard the long-term impact of customer interactions
- Estimate the total value a customer brings to a business over their lifetime
- Focus only on short-term profits
Customer lifetime value (CLV) quantifies the net profit a customer generates for a business over their entire relationship. It considers factors such as repeat purchases, referrals, and retention costs, providing insights into the long-term profitability of customer relationships. Understanding CLV helps businesses allocate resources effectively and prioritize customer acquisition and retention efforts to maximize profitability.
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