52 Weeks of FOS

Customer Value Metrics – Week #11 of The Financial Operating System®

Customer Value Metrics
April 14, 2025 by Calvin Wilder in Articles

Last week’s note discussed marketing and sales metrics in the context of bringing in new business for your company. This week we look at metrics that reflect the value that customers and clients derive from doing business with you, and that you can use as part of planning growth and retention strategies. 

Customer Value Metrics

  1. Net Promoter Score (NPS):

    • Measures customer satisfaction and loyalty.
    • Calculated based on customer responses to the question: “How likely are you to recommend our business to others?”

  2. Customer Churn Rate:

    • Reflects the percentage of customers lost over a specific period.
    • Can be calculated by the number of customers or revenue lost as a percentage of the starting customer base or revenue base.

  3. Retention Rate:

    • The inverse of churn rate, indicating the percentage of customers retained during a given period.

  4. Customer Lifespan (or Half-Life):

    • Estimates the average time a customer stays active.
    • Calculated as 1/(monthly churn rate).

  5. Lifetime Customer Value (LCV):

    • Represents the total revenue or profit generated by an average customer over its lifespan.
    • Helps determine how much can be spent on acquiring new customers profitably.

  6. Customer Labor Value Multiple:

    • Measures profitability per customer by comparing gross profit generated to labor costs incurred.
    • Expressed as a multiple (e.g., 3X), this metric is useful for pricing decisions and assessing customer profitability.

Importance:

These metrics help businesses understand customer satisfaction, optimize customer acquisition costs, and retain profitable customers. By tracking these, companies can improve customer relationships and align strategies for sustainable growth.

Next Step:

Business owners can self-implement The Financial Operating System. Chapters are available to download at smartbooks.com/resources or you can buy the whole book from Amazon (the marketing firm version or the general business version).

If you would like assistance with implementation or would like to accelerate results for your business, please contact author Cal Wilder at cwilder@smartbooks.com or book a free consultation with our team directly using this calendar link.