Final Answer:
Customer B would likely have a higher lifetime value to the retailer based on the given purchase data.
Step-by-step explanation:
The lifetime value (LTV) of a customer represents the total revenue a customer is expected to generate throughout their relationship with a retailer. To determine this, we can calculate the Average Purchase Value (APV) and Purchase Frequency (PF) for each customer. APV is obtained by dividing the total purchase amount by the number of purchases made, while PF is calculated by dividing the total number of purchases by the unique time periods.
For Customer A:
Total Purchase Amount = $500
Number of Purchases = 5
APV = $500 / 5 = $100
Number of Unique Time Periods = 3
PF = 5 / 3 ≈ 1.67
For Customer B:
Total Purchase Amount = $800
Number of Purchases = 4
APV = $800 / 4 = $200
Number of Unique Time Periods = 2
PF = 4 / 2 = 2
Considering Customer B's higher APV and PF values compared to Customer A, it indicates that, on average, Customer B spends more per purchase and shops more frequently. These metrics suggest that Customer B is likely to continue spending at a higher rate over a shorter period, resulting in a higher LTV for the retailer.
Customer B's higher frequency of purchases and higher average spending per transaction indicates a stronger potential for increased revenue generation over time. Hence, based on the given data, it's reasonable to conclude that Customer B would have a higher lifetime value to the retailer than Customer A.