It’s rare to come across a finance expert who has such a deep understanding of true customer value and all the complexity that goes along with it. But, Professor Daniel McCarthy has joined forces with Pete Fader Professor of Marketing from Wharton and Rob Markey, Partner at Bain New York, to spread the word about their Customer Based Corporation Valuation method (CBCV). Pundits in Silicon Valley as well as many other modern firms have already taken notice.
So we wanted to look deeper into this valuation method and see if there were any takeaways for investors and people in growth, marketing, sales or executive positions.
There were many.
Slight warning however. Unless you have a basic grasp of finance fundamentals, you might get a little lost or have to Google a few terms during the discussion. Daniel was even stretching my knowledge at times.
But this will be a fascinating dive into some of the detail around how customer value manifests itself in a financial value sense. Especially how that value translates into revenue and profit for the organization. This is exactly what's lacking from so many marketing industry discussions and a topic which I’m personally very passionate about.
After listening to this episode you should get a good grounding in the best way to approach increasing the value of a company from a customer perspective. We talk about vanity metrics vs lower funnel metrics. We discover how to properly calculate your unit economics like CAC and LTV - and the mistakes most make when doing so. And you'll also find out why he disagrees with the assertion that CLV should be your NorthStar.
There is also a key issue that Daniel clashes with Byron Sharp on which all should hear.
But do not fear, this isn’t an academic discussion about technicalities or a debate between right or wrong. What it will give you however, is a solid framework and approach to take when assessing what actions are financially valuable for a company and which aren't.
Daniel uses lots of examples from his practical business experience which includes some very interesting discussions around Slack and Spotify
Why do tech companies command such high valuations relative to their revenue?
What do oil wells and customers have in common?
Why is customer heterogeneity such a critical concept to understand for marketers?
How can VCs and investors improve the accuracy of their valuations?
All these answers and more await so…
If you want to know your CAC from your CLV, and your DCF from your NPV...start listening now.
