Which statement best describes CLV?

Which statement best describes CLV?

• A. The current market share of a brand
• B. The number of repeat purchases per customer
• C. The predicted net profit from a customer over the duration of their relationship
• D. The cost to maintain a customer relationship

Answer: (C)

CLV is the forecasted profitability of a customer over the entire time they interact with a business. It combines the revenue a customer is expected to generate with the costs of serving and acquiring them, and it adjusts for the time value of money to give a present‑value net profit tied to that customer. Because of this, the statement that describes CLV as the predicted net profit from a customer over the duration of their relationship best captures what CLV measures. It goes beyond just how much a customer buys or how many times they repeat, and it subtracts the costs of serving them, rather than focusing only on market share or ongoing expenses. In practice, CLV helps decide how much to invest in acquiring and retaining customers by estimating how valuable each one will be over time.

CLV is the forecasted profitability of a customer over the entire time they interact with a business. It combines the revenue a customer is expected to generate with the costs of serving and acquiring them, and it adjusts for the time value of money to give a present‑value net profit tied to that customer. Because of this, the statement that describes CLV as the predicted net profit from a customer over the duration of their relationship best captures what CLV measures. It goes beyond just how much a customer buys or how many times they repeat, and it subtracts the costs of serving them, rather than focusing only on market share or ongoing expenses. In practice, CLV helps decide how much to invest in acquiring and retaining customers by estimating how valuable each one will be over time.