Customer Lifetime Value

Correct Answer: Customer lifetime value (CLV) of both new and existing customers to determine which strategy will yield the highest long-term value

The most effective marketing strategy should be based on the customer lifetime value (CLV) of both new and existing customers. CLV is a measure of the total value a customer brings to a company over their entire relationship with the business. By comparing the CLV of acquiring new customers versus upselling to existing customers, the project manager can determine which strategy will yield the highest long-term value for the company. Focusing solely on short-term revenue, cost per acquisition, or the total number of customers acquired or upsold does not provide a comprehensive view of the long-term impact of the chosen strategy on the company's success.

Correct Answer: Analyze historical data on customer retention, average purchase value, and purchase frequency for each segment to calculate CLV.

The best action for the project manager to calculate the customer lifetime value (CLV) for each segment is to analyze historical data on customer retention, average purchase value, and purchase frequency for each segment. To accurately determine the long-term value of each customer segment, it is essential to consider factors beyond just the initial purchase. Customer retention, average purchase value, and purchase frequency provide valuable insights into the potential revenue generated by each segment over time. Focusing solely on initial purchase value ignores the potential for repeat business and long-term profitability. Conducting surveys on perceived value may provide some insights but does not directly translate to actual CLV calculations. Assigning equal importance to all segments and allocating resources evenly may lead to suboptimal resource allocation and missed opportunities to prioritize high-value segments. By analyzing historical data on key metrics such as retention, purchase value, and frequency, the project manager can make data-driven decisions to prioritize features and allocate resources effectively based on the expected long-term value of each customer segment.

Correct Answer: Customer lifetime value (CLV) to estimate the total revenue generated by the customer segment over their entire relationship with the company

The customer lifetime value (CLV) is the most appropriate metric for the project manager to prioritize when assessing the long-term profitability of a new customer segment. CLV estimates the total revenue a customer will generate throughout their relationship with the company, considering factors such as retention rate, average purchase value, and purchase frequency. By calculating CLV, the project manager can determine whether the segment is worth investing in and allocating resources to, based on its potential long-term value to the company. While customer acquisition cost (CAC) is important for understanding initial investment, it does not provide a complete picture of the segment's profitability over time. Average revenue per user (ARPU) focuses on short-term profitability and does not account for customer retention or future revenue potential. Net promoter score (NPS) measures customer satisfaction and loyalty, which can contribute to long-term profitability, but it does not directly quantify the financial value of the segment.