Business Case Studies & Business Publications

Customer Lifetime Value

Pfeifer, Phillip E...

Technical Note

Customer Lifetime Value

Pfeifer, Phillip E.; Farris, Paul W.; Bendle, Neil

M-0800 | Published April 20, 2011 | 9 pages Technical Note

Collection: Darden School of Business

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This technical note introduces important metrics firms use to monitor customer relationships. An important summary of customer activity is the profit the firm receives from each customer. Customer profit (CP) is the metric that summarizes the past financial performance of a customer relationship and is covered in a companion note, "Customer Profit" (UVA-M-0799). The central difference between CP and customer lifetime value (CLV) is that CP measures the past and CLV looks forward. This note addresses the forward-looking metric that attempts to put a dollar value on a customer relationship. This technical note is an excerpt of the more comprehensive treatment of customer metrics found in "Customer Profitability" (UVA-M-0718).