1.13 Assume that a customer shops at a local grocery store, spending an average of $200 a week and resulting in a retailer profit of €10 each week from this customer.

Assuming the shopper visits the store all 52 weeks of the year, calculate the customer lifetime value if this shopper remains loyal over a 10-year life span. Also assume a 5 per cent annual interest rate and no initial cost to acquire the customer. (AACSB Communication; Analytic reasoning)

How much are you worth to a given company if you continue to purchase its brand for the rest of your life? Many marketers are grappling with that question, but it’s not easy to determine how much a customer is worth to a company over his or her lifetime. Calculating customer lifetime value can be very complicated.
Intuitively, however, it can be a fairly simple net present value calculation, which incorporates the concept of the time value of money.