Lifetime Customer Value (LCV)
Instead of looking at the value of a Customer based on each separate transaction, consider their value to you over a lifetime of loyal purchases. You will view each Customer as an extremely valuable asset to your firm!
Tom Peters, legendary management thinker and author, calculates Lifetime Customer Value this way:
“Let’s say I make a purchase worth $100. You may regard me as a $100 Customer and treat me appropriately. But if I am a loyal regular Customer, I may purchase from you once a month. That adds to $1,200 each year. If I stay loyal and continue buying from you for ten years, the total would then be $12,000.
“In addition, if my loyalty is very high, I might also recommend you to my friends. If five of them trust me and my recommendation, they could also become your loyal Customers, each worth $12,000. That’s $60,000. Add my $12,000 back in and you’ll see me as a Customer with a Lifetime Value of $72,000!”