Why Might a Company Try to Determine the Lifetime Value

question 88

Essay

Why might a company try to determine the lifetime value of a customer? What must a company do to determine this information?

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Definitions:

Contribution Format

A method of organizing the income statement where variable expenses are deducted from sales to show the contribution margin, highlighting the variable costs and fixed costs separately.

Income Statement

A financial document that provides an overview of a company's performance over a specific period, detailing revenues, expenses, and net earnings.

Net Operating Income

An indicator of a firm's earnings generated from its principal business activities, not accounting for interest and tax deductions.

Variable Costing

An accounting method that includes only variable production costs in product costs, excluding fixed overhead.