Customer Focused Strategy and Customer Lifetime Value

Customer focus is key for any business but in the past it has been hard to quantify the effects of investment. This paper should help you in “Sizing the Prize” that improving customer focus can deliver. Grassroots Digital have a wealth of experience in assisting small businesses and entrepreneurs in developing their customer focus, so if after reading this article you need further help or advice then get in touch. justin@grassrootsdigital.co.uk or +44 (0)7980 578 401.

Customer Lifetime Value (CLV) is at present being touted as one of the central tools in assessing how well a company is performing with regards to the tactical decisions it makes in handling and extracting value from customers. In concert with this it is, on the surface, through being customer focused that we be build up customer value, via a number of factors that include both tangible and intangible measures. The tangible measures revolve around such things as profit figures, market shares and average revenue figures, while the intangibles include such aspects as brand value, reputation, customer knowledge and service levels.

This paper will attempt to outline a framework for allowing both tangible and intangible results to be assessed and quantified together, allowing financial and marketing measures of performance to be combined seamlessly. It will do this by discussing the following. Firstly it will offer a definition of Customer Lifetime Value, and discuss the implications of CLV on company valuations. Secondly it will examine how a customer focused approach can give improvements in CLV. Thirdly it will outline a model to quantify the effects of a customer focused approach on CLV. It will then take two examples of companies from the same industry, one of which has followed a more customer focused approach than the other, and examine whether any differences in their valuation can be attributed to these difference in customer focus. From this it will make conclusions on using CLV, with these additional customer focus variables, as an alternative valuation method.

For the rest of this article please download at Customer Focused Strategy and Customer Lifetime Value (577)