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Consilient Observer
May 19, 2021

The Economics of Customer Businesses

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May 19, 2021

The Economics of Customer Businesses

Consilient Observer

The Economics of Customer Businesses

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May 19, 2021


Calculating Customer-Based Corporate Valuation

  • This report focuses on the customer as the basic unit of analysis in understanding value. The idea of customer lifetime value (CLV) has been around for decades, but we believe that our discussion is richer and more nuanced than what many companies and analysts present.
  • Two influential marketing professors introduced a framework called customer-based corporate valuation (CBCV), which links customer economics to shareholder value. CBCV’s main contribution is that it provides a more robust way to forecast revenues than current models do.
  • We discuss the key elements of the CBCV model, including customers, revenues, and costs. We show the limitations of common ratios such as customer lifetime value to customer acquisition cost (LTV/CAC). 
  • The report explores how companies can create consumer and supplier surplus, provides a case study on the postpaid segment of AT&T Mobility, examines trade-offs in the drivers of value, and explores common errors.
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