Customers = A business
There is an old saying that until you have a customer you don’t have a business. You can go out and open a shop, or set up a website, or advertise your consultancy services – you have set up the business infrastructure – but until you have customers you don’t really have a business.
And, of course, the prime role of marketing within an organization is to generate enhanced long-term profits, deliver customer satisfaction, and improve the competitive strengths of the organization over time. Much of this is delivered through the creation, retention and growth of the firm’s customer base.
If we break marketing goals down to three simplistic tasks, you could argue the prime function of marketing is only to deliver three things for an organization, namely:
- Attract new customers
- Grow share of customer
- Retain profitable customers
In other words – GET – BUILD – HOLD customers.
Obviously, there is a whole array of marketing strategies and tactics that are built by the firm (based on market research and analysis) to deliver these goals for the organization.
One of the key benefits of using a customer lifetime value formula in evaluating marketing performance, is that it combines all these three prime marketing objectives into one formula (and one end number), which can be measured and tracked over time.
This allows the prime marketing function to be assessed based on a long-term profitability perspective. In other words, it aligns the marketing activities with the financial and corporate objectives of most organizations.