Running a business involves taking care of a large number of things all at once. However, the aspect that takes precedence over all else is the financial side of things. A business needs to be profitable and ensuring that unfortunately can take a lot of time away from business owners and managers.

This obsession with financials often leads to businesses peering down at every expense and profit over a quarterly, or even weekly basis. With their attention firmly diverted towards judging how well they are doing financially, it goes away from one key aspect: taking care of customers.  

Why Customers Matter

For a business, it is the customers that matter above everything else. They are the ones who define the brand, and also the ones keeping the business operational. It is the customers who can make or break a business, to an extent that is far more crucial than prevailing economic situations or rising raw material costs. After all, it is the customers who are dealing with the business, keeping it afloat while also influencing its growth.

Due to the commercial nature of the current financial world, a greater focus on the financials and the numbers is to be expected. Everyone is looking for ways to increase profits, and it is far more direct and simpler to look at numerical trends than something as qualitative as customer opinion. However, it is the latter that should essentially have more focus. The customers are the ones responsible for driving sales. They are the ones responsible for any profit and/or any loss. Hence, when it comes to understanding the performance of a business, or its current state, the customers matter far more than just the numbers.

Looking at a customer’s value to your business, and trying to increase is thus far more important than analyzing cash flow and ascertaining how the money goes in and out of your organization. The Lifetime Customer Value matters to a business and we'll tell you exactly why below.

It Offers a Customer-Centric Approach to Business

Lifetime Customer Value (commonly referred to as LTV) makes businesses look away from just the numbers and check how they relate to their customers. Looking at the net profit obtained from every customer helps businesses forge more customer-centric approaches that are aimed at building stronger relationships with their customers in hopes to increase dealings with them. This customer-focused approach not only increases revenue but also leads to happier clients that stick with your business for the long-term.

Helps Your Business Get a Gauge on Marketing Performance

It is a general rule of the financial world that the Lifetime Customer Value must exceed the Customer Acquisition Cost. The latter is a measure of how much it costs to attract a customer towards your business. If the net amount is not positive, you have a good idea that your marketing and advertising campaigns are not going according to plan. Hence, the Lifetime Customer Value is a great way to gauge your business’ marketing prowess.