There is lots of talk, often sales-hype from digital urgers, about Lifetime Customer Value. When applied correctly, it is a vital measure, but when you look closely, it often means lifetime customer revenue.
Revenue is of little commercial value in the absence of margin, so the discussion can be completely misleading.
Understanding the margin generated by customer segments, or in some cases, individual customers is an immensely valuable metric that enables you to focus resources where there is the most benefit to the enterprise. You can make informed tactical choices with a great level of confidence based on the margin delivered.
Customer margin is also an enormously useful metric elsewhere.
Sales people are often rewarded on revenue, which can be gamed. Margin over time is much harder to game, and a far better measure of the effectiveness of a salesperson in delivering value to the enterprise while serving customers.
Similarly, calculating the cost of acquisition of a customer gains traction when measured against margin rather than revenue.
One of my clients businesses relies on referrals as a source of business. Increasingly they are moving towards margin on converted referrals as the single metric that best measures the impact of their marketing and product delivery efforts.
You cannot generate margin in the absence of revenue, but you are easily able to generate revenue without margin. Not a good idea!!
As an aside, also beware of the difference between margin and mark-up. They are similarly often used to mislead the unwary.
