The emphasis on keeping customers for long periods of time is the central focus of ______ value and the reason firms focus on cu
1 answer:
Answer:
Customer Lifetime Value
Explanation:
Customer Lifetime Value is a measure of how much amount of money a customer spends on your business/products/services over the course of his whole lifetime.
It is a predictor of how well you are doing to retain your existing customers.
Why is it important?
suppose you spend $10 to advertise your product (belt) and a customer buys 5 belts on average every year for 15 years. You get $12 profit for each belt sold.
$
Subtract the advertising cost
$ This is your customer lifetime value
Now imagine what would have happen if we had to sell these belts to 75 different customers?
The advertising cost to attract 75 customers would have been too much and hence net profit and customer lifetime value would be very less.
$
$
This is why customer lifetime value is important and businesses focus on retaining their customers for longer periods.
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The increase in the bus tickets makes the opportunity cost of the hamburger to decrease as now, consuming an hamburger will make Alphonso renounce to a lesser amount of bus tickets. As the the opportunity cost is the goods or services we don't consume in favor for those we do.
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