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Lifetime Customer Value

A customer's first purchase begins a cycle of sales opportunities. This cycle is the Lifetime Customer Value (LCV), and it is core to an ongoing customer relationship. Cultivating the most valuable customers and measuring their potential sales over time delivers the relative value of their lifetime worth.

Using the LCV as a benchmark, you can determine the level of investment you need to make in your most loyal customers. Compare this with the cost of gaining awareness and preference of new customers. New customer acquisition costs are higher than those related to retaining a customer. You'll also be able to determine the loss to your business if this customer should abandon his shopping cart. An LCV cycle depicting the value of repeated purchases is reflected in Figure 2-2.


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