Let’s take spending on customer acquisition as an example. The concept of customer lifetime value (LTV) is a measure used by VC investors and most early-stage companies to justify continuing to invest in acquiring new customers adding to the growth of businesses.
Simplistically, if the cost of acquiring a customer is lower than the lifetime value of that customer, then companies can and should continue to postpone P&L profits and dividends and keep investing. Companies as diverse as Netflix, JustEat, Farfetch and Zoom have used this accounting metric to good effect.
Now that every interaction with customers is known, tracked and recorded, cohort analysis is another important measure of the future potential for companies to maintain and accelerate value creation. Read from source….