Question

What components are taken into consideration when calculating customer lifetime value? (Select all that apply)

A) Purchase frequency
B) Customer acquisition cost
C) Customer loyalty
D) Average transaction value

Answer 1

The components considered when calculating customer lifetime value are purchase frequency, customer acquisition cost, customer loyalty, and average transaction value, each integral for understanding a customer's value over the relationship duration. All the given options are correct.

Step-by-step explanation:

When calculating customer lifetime value (CLV), several components are taken into consideration. These components include:

• A) Purchase frequency — how often a customer makes a purchase within a set period.
• B) Customer acquisition cost — the total cost associated with acquiring a new customer.
• C) Customer loyalty — the likelihood of the customer to remain with the company over time.
• D) Average transaction value — the average amount of money spent by a customer per transaction.

Each factor is important in comprehensively understanding the value a customer brings to a business over the span of their relationship. Companies seek to maximize CLV by enhancing these factors, each influencing the eventual lifetime value of a customer.All the given options are correct.