We are living in a world of customer-centricity
where firms are increasingly aligning their organizations around
customers. Of late, this trend has gathered momentum with CEOs
of many firms expressing their intent to put customers at the
top of the long list of issues that they must focus for growth
. An effective way of achieving this objective is by linking the
outcome of marketing initiatives directed at increasing customer
value to the firm’s market value. Is this even possible?
We propose a framework that can
link the outcome of marketing initiatives as measured by the customer
lifetime value to the firm’s market value as measured by
the stock price of the firm. Implementation of such a framework
with two Fortune 500 firms (in business-to-business and business-to-consumer
industry respectively) indicated that the customer lifetime value
metric could reliably predict the average market value or the
average stock price of the firm within a 15% error range. We further
demonstrated how these two firms could increase their market value
by leveraging the drivers of customer lifetime value through relevant
marketing strategies.
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