The customer lifetime value is the total predicted profit generated by an individual customer.
Imagine you run a community for a recruitment consultancy. Your recruitment community helps identify leads. A converted lead (i.e. someone who uses your service to recruit an employee) might generate $20k in profit. Let’s imagine you generate 30 such leads a year. This is $600k in profit. That is a good outcome.
But now imagine the average company remains a customer for a further four projects over three years generating $20k in profit for each person you place. The lifetime value of these customers is now $2.4m* ($20k * 30 * 4).
* (in practice, we should use a discount rate for profit generated in future years).
Do not ignore the lifetime value of the customers the community has helped acquire or retain for the organization. This is value directly created by the community and should be attributed to the community. Understanding the lifetime value can be the single biggest factor to determine if the community will gain the additional investment it needs.
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