A customer's lifetime value is calculated by:
A) Summing the projected annual profitability of the customer
B) Summing the annual sales of the customer and then dividing by the projected lifetime
C) The firm's MRP system
D) Finding the NPV of a customer's projected lifetime profits for the firm

Question

Quizplus · Accepted Answer

The most accurate approach to calculating a customer's lifetime value is to find the net present value (NPV) of their projected lifetime profits for the firm. This takes into account the time value of money and the potential costs associated with retaining the customer. A and B may provide a rough estimate, while C is not directly related to calculating customer lifetime value.

A Customer's Lifetime Value Is Calculated By