Almost all the big multinational companies use the principle of Life Time Value of Customers to expand their business. All the big retail units and businessmen, who are selling products and services to its customers, they try to determine the Life Time Value of their Customers. Now, “How this Lifetime Value of Customer is calculated?” Let us take an example to understand this. ### **Example:** Suppose you run a Gymnasium business. One customer pays you fees of Rs 1,000 per month and spends only 36 months in your gym and then leave the gym. So, one customer is giving you a business of Rs. 36,000 (= Rs.1000 x 36 months) in his lifetime. This is the Lifetime Value of the Customer. Now, after determining the Lifetime Value of the customer, you should try to determine the ways through which the time period of the person to stay in your gym increases from 36 months to 48 months or to 60 months. This will increase the Lifetime Value of the customer. ### **Repeat Business Vs. Reference Business** There are some businesses in which repeat business do come. Repeat business means a customer purchases product from you again and again. But, in some businesses, reference business comes instead of repeat business. In the reference business, you should compare it with your COCA, i.e. Cost of Customer Acquisition. **Example:** Solar Panel is not a kind of product that is purchased by a customer on weekly, monthly, or yearly basis. Once it is installed, it can work for 2-4 years effectively and only some service issues may come after that. In case of such a product, reference business comes instead of repeat business. If you have a business of solar panel and you have invested a huge amount on advertisements and sales manpower and repeat business is not coming, then your COCA (Cost of Customer Acquisition) is very high. So, your business will not remain viable for you. On the other hand, suppose you have a school and a student studies for 12-14 years in your school. You have invested a huge amount on the advertisements. You can easily recover this amount from the student during his tenure of 12-14 years. So, in this business, your COCA is low. **How to Calculate COCA?** COCA can be calculated using the following formula: **Cost of Sales + Advertisement Cost = Total Cost** **COCA = Total Cost / Total  Number of Customers Acquired** **Customer Retention Rate Vs. Customer Attrition Rate** During the Recession in the USA in 2008, intelligent companies knew that now the customer will leave them. So, they increased their retention policies so that the customer remains with them because it will be difficult to acquire them later. So, it is essential for you to determine customer retention and attrition rate. **Customer Retention Rate:** Retention Rate is known as the percentage of customers a company retained during a given period of time. Customers can be retained through the following strategies:a.    Good customer serviceb.    Improvement in quality of productc.    Marketing and Salesd.    Customer support **Customer Attrition Rate:** It shows the percentage of customers a company loses over a specific period. Customer attrition rate can be ascertained by dividing the number of customers lost by the total number of customers at the start of the period. ### **Evaluate Your Customer in 5 Stages** Before expanding your business you need to evaluate your customer through 5 given stages: 1. **New Customer:** When you make a new customer 2. **Repeat Customer:** Existing customer that comes to you again and again. 3. **Loyal Customer:** Exiting customer that becomes your permanent customer, and doesn’t leave you at any cost. 4. **Promoter:** When a customer starts promoting your product by referring it to his friends or family. Now you don’t need salesman, marketing and advertising. 5. **Advocate:** When a customer becomes fanatic about the product that even if there is some defect in your product he will not go away.