Customer Lifetime Value in Insurance - sasCommunity.org

The limited resources in a company can be used that way especially forhighly valuable customers, instead of wasting them for less valuablecustomers.4) Let`s have a look at the definition of the customer lifetime value:The customer lifetime value is the net present value of a customer. Itconsiders the difference between the total amount of revenues from acustomer, and the companies` expenses for this customer during the wholeduration of a relationship.What does this mean in detail?5) Let`s move on to the components, which determine the CLV. You have todistinguish between quantitative and qualitative factors.- Quantitative factors can be measured directly and they concern thepast, as for example the revenues and costs of each customer in thepast.The sales volume, acquisition costs, direct costs and activity-basedcosts can be regarded as quantitative components. These componentscan be used to determine the present value of a customer.- Qualitative factors can`t be measured directly, because they concernethe future.Examples for qualitative factors are the Cross-or Up-Selling-Potential,the referral potential, the information potential or the opinion leaderpotential.- The cross-Selling Potential deals with, how far a customer intense tobuy new offered products from a company.- The reference potential considers referrals of other, new customersmade by a specific existing customer.