What is the role of customer lifetime value in budgeting across channels?

• A. CLV is not used in channel budgeting
• B. CLV estimates future profits per channel and guides allocation toward channels with higher incremental CLV
• C. CLV only affects product pricing
• D. CLV is based on one-time purchase value

Answer: (B)

Customer lifetime value is a forward-looking measure of the net profit you expect from a customer over the entire relationship. When budgeting across channels, you estimate how much value each channel will generate over the customer’s lifetime after accounting for the costs of acquiring and serving customers through that channel. This lets you compare channels on an apples-to-apples basis and allocate more to the channels that deliver higher incremental CLV per dollar spent, because those channels boost long-term profitability. In practice, you forecast CLV by channel under different spend scenarios, watch for diminishing returns, and adjust allocations to maximize total CLV. CLV isn’t about one-time purchases or simply setting prices; it captures repeat purchases, retention, margins, and cross-sell over time, making it the best guide for channel budgeting.