Smart companies realize that repeat business (customer loyalty) is one of the most important — if not THE most important — objectives to achieve in both the short and long run. This is a key challenge for marketers.

As Bain & Company explains:

“It is possible to calculate loyalty economics with great precision, if you have the resources and the tools to do so. If not, you can also make rough estimates that can help guide decision-making. This page describes a relatively simple way to get reasonable, rough estimates of the potential value that can be created by improving your company’s Net Promoter score and earning the loyalty of more of your customers.”

According to Bain, a simple formula for computing customer lifetime value is:


Click the above formula to read a lot more about customer lifetime value and how to calculate it.

4 Replies to “How Do You Compute Customer Lifetime Value?”

  1. The first company I think of when I think of loyalty economics is Apple. Apple is an extremely monopolizing company and they do their best to ensure that their customers are only using apple products. While they do so effectively, I think they also turn customers off by the extent to which they do it. Personally, I stick with PC because I find their brand too pushy and limiting. While I do own two apple products (Iphone and Ipod) I have a Dell laptop and have no plans on purchasing a Mac.

  2. I think that this formula is a very smart idea. The main objective of any company is to satisfy customers, and consistently gain more and more customers. When they have a set formula in place, it helps map out an idea in order to make the company successful and expand to more people, and have loyal customers throughout. I support this formula and believe it should be used all over.

  3. I feel that this formula is an extremely great idea as well as very effective. Sure companies want to make money each day, however without a clear customer loyalty how can that be achieved on a day to day basis? This formula clearly shows a respective company what their goals really should be in order to achieve customer lifetime value.

  4. Consumer lifetime value is what companies thrive off of. Consumer loyalty existing in a company is what helps it grow. And with the use of this very well thought out formula, a company can establish a consumer lifetime value therefore resulting in consumer loyalty. As long as a company has their goals set and they value their customers, they will be very successful. A loyal customer will talk about your company with others and possibly even over social media which will help increase your customer appreciation and lifetime value.

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