Determine the Real Value of Your Customer Relationships

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Robbie Baxter shares a video and transcript of this interview on subscription-based business with insights on how to quantify the value of customer relationships. 

Revenue from loyal customers is more valuable than anonymous transactional revenue–it’s more predictable and more profitable. But until recently corporate valuations haven’t had a way to distinguish the quality of the revenue based on customer relationships.

Dan McCarthy, Assistant Professor of Marketing at Emory University’s Goizueta School of Business, is advocating for a new approach, known as “Customer Based Corporate Valuation.

I recently talked with Dan about why customer lifetime value is such an important and misunderstood metric, how to rethink the way companies are valued by the public markets, and what all of this means for subscription businesses.

Robbie Baxter: Can you explain customer based corporate valuation for the lay person.

Dan McCarthy: Customer base, corporate valuation at its most basic level is an enlightened way of forecasting a company’s future revenues, but driving that revenue forecasts off of what the customers will do. So hopefully it’s pretty intuitive that pretty much every major valuation method starts with some sort of a revenue forecast. And the main thing that we would say is every dollar of revenue has to come from a customer who’s making a purchase.

 

Key points include:

  • Customer base corporate valuation
  • Customer lifetime value
  • The changing landscape of customer data

 

Read the full interview, How to Quantify the Value of Your Customer Relationships–An Interview with Professor Dan McCarthy, on LinkedIn.