Monday, October 06, 2008

Customer Lifetime Value

The concept of customer lifetime value is in existance since 90s. In simple terms, it means the total sum of profit a customer brings to the company in present value terms. If the cost of aquiring the customer is more than the customer life time value, then the company should not be acquiring the customer. Sounds familiar?? Yes, this is the same ceoncept used in investment decisions since 1000s of years.

I wonder why Wamu is sending me bulky mailer with checks every month, when i have never used them and i have not used their credit card much.Instead of spending that $5 on me every month, they should be spending on someone else.

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