Welcome to the What's Next! Podcast with Tiffani Bova.
This week on the What’s Next! Podcast, I’m looking back at a conversation I had with Peter Fader, professor of Marketing at the Wharton School of the University of Pennsylvania and the co-founder of Zodiac.
Peter’s expertise centers on the analysis of behavioral data to understand and forecast customer shopping and purchasing activities. His insights are reflected in his great book, Customer Centricity.
Customer centricity is one thing. Using customer lifetime value as a corporate valuation metric is an entirely different thing. Peter and several of his students produced some groundbreaking research recently which is turning Wall Street’s quarterly predictions on their head. Peter and his team analyzed Dish Networks, Overstock.com, Wayfair and Blue Apron using the public data provided to investors. They came up with company valuations that within 3-5% difference of the forecasts Wall Street was making.
Next, as a fun academic exercise, his students created forecasts for the next 4 quarters using various statistical methods. Peter compared his students’ numbers to Dish’s quarterly numbers and noticed two things: (1) the students were within .5% of the number that Dish announced, and (2) the Wall Street analysts were off by about 10%.
His hope is that the CFO will be just as interested in this bottom-up analysis, and it will create a dialogue with the marketers that just ordinarily doesn't happen.
THIS EPISODE IS PERFECT FOR… anybody who wants to learn how to use customer lifetime value (CLV) as a corporate valuation metric.
TODAY’S MAIN MESSAGE… Peter and his current and former students are doing tremendous work calculating CLV and what it means for companies’ future growth potential. One groundbreaking way the team is discovering this economic value is by understanding how Wall Street forecasts a company’s worth in the stock market by looking at the data rather than using intuition, which is often how Wall Street analysts are doing their job.
WHAT I LOVE MOST… Peter’s work shows—through raw data—that companies truly need to master customer lifetime value. As customer experience becomes an emphasis for many companies, understanding which customers to focus on will become even more important. It isn’t possible to deliver high-touch, high-value customer service to everyone. Brands must become much more prescriptive in who they serve and with what level of support.
Running Time: 33:45
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Peter’s Book:
Customer Centricity
Peter’s Article:
How Wharton Marketing Students Beat Wall Street Analysts at Their Own Game
What's Next! with Tiffani Bova