Customer Metrics and Their Impact on Financial Performance

TLDR

Understanding how customer metrics relate to profitability is increasingly critical for justifying marketing spend amid growing scrutiny. This paper aims to synthesize existing research on how customer metrics affect firms’ financial performance and outline future research directions. The authors review and model both perceptual and behavioral customer metrics, then present nine empirical generalizations linking these metrics to financial performance.

Abstract

The need to understand the relationships among customer metrics and profitability has never been more critical. These relationships are pivotal to tracking and justifying firms’ marketing expenditures, which have come under increasing pressure. The objective of this paper is to integrate existing knowledge and research about the impact of customer metrics on firms’ financial performance. We investigate both unobservable or perceptual customer metrics (e.g., customer satisfaction) and observable or behavioral metrics (e.g., customer retention and lifetime value). We begin with an overview of unobservable and observable metrics, showing how they have been measured and modeled in research. We next offer nine empirical generalizations about the linkages between perceptual and behavioral metrics and their impact on financial performance. We conclude the paper with future research challenges.