I was recently asked by a client, “if you could only have one measure to manage your business, what would it be?”. I quickly thought about the range of metrics available to executives today: profit per customer, market share, revenue growth, customer satisfaction, new product success, share price… the list goes on.
However the one metric that always comes to mind is one that not many businesses use, lifetime value of customers, and yet it is the most powerful.
This metric provides a long term customer centered view of your business. What is the value, in profit terms, of an average customer over the potential life of your business relationship?
This is not a static number but an active one that can be used to value your business and identify opportunities to grow that number.
It’s real power however is in galvanizing everyone in a company around the importance and value of customer relationships. It proves the tangible logic for why every interaction matters and connects everyone with the ultimate customer.
Below is a video interview with one of the great practitioners of Lifetime Value, Chris Zane of Zane’s Cycles
If you are interested in seeing more from this interview series you can go to MarketCulture’s Video Library
I agree with you that customer lifetime value is a very important metric that every business should use. Customer experience is highly important and always needs to be addressed.
Furthermore, I think every business should be flexible and willing to change its product in favor of what its customers desire/need.
I’ve quoted your post and translated these terms into SaaS business terminology in Totango’s blog:
http://blog.totango.com/2011/09/customer-lifetime-value-and-customer-experience/