 Go to Multimedia Education Resource for Learning and On-line Teaching (MERLOT) at http://www.imrtn.com/lifetimecalc.asp and compute two lifetime customer values (CLV) based upon a one-year customer experience and a five-year relationship. First, assume you will sell $25,000 two times per year to your new customer, but for only a single year. The customer will not provide you with any referrals. Compute the total value of a satisfied customer given this scenario. Second, run the same calculation, but make these new assumptions: The customer continues to buy $25,000 twice a year for five years; in addition, the customer provides two referral customers that result in one additional customer. Based upon this information, recompute the total value of a satisfied customer. What are the financial differences between a one-year and five-year customer? How can sellers increase their profitability by computing the expected CLV?
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