Do you know your customer? Do you really know them? Could you say which ones are the most profitable? Most likely the first instinct of any company director is to answer yes to these three questions. However, there are very few that could accurately list their company’s 20 most profitable customers (not the ones that generate the most revenue, obviously, but rather the ones who best fit into a relationship between revenue and effort/costs for the company). Fewer still would successfully answer the question, “what customers do I share with the competition?”; and even fewer still would answer accurately if asked what market niches have the highest potential and are not being taken advantage of by the company.
Knowing the customer portfolio with such a high degree of accuracy is not at all simple, but the consequences of not doing it can be harmful to the company. Apart from the time, effort and money wasted on solving and correcting mistaken decisions by trial and error that are wholly inappropriate in our day, when you add the hypothetical accuracy of the competition, the company is throwing away money and customers and leaving them for the competition. Is there anyone that can afford that?
Knowing how and what our customers by, why, when, and knowing what they want is essential to making them loyal and, of course, taking them from the competition. This is the conclusion reached long ago by many companies. But what they don’t know is how to do it. The solution lies in analysis of the customer portfolio by means of customer intelligence techniques.
The objective of this study is to know the customer portfolio in-depth, its composition and situation, in order to get the most out of it. Using that, we can answer questions such as who the truly best customers are, what sectors they belong to, how they should be segmented, which are at risk of abandoning, what leadership possibilities the company has in each niche market, or what possibilities it has to create specialized products according to the activity and typology of customers.
In short, it’s about taking care of the company’s principal asset, but also get the most out of it. How much are McDonald’s customers worth? What about Telefonica’s? What about El Corte Inglés’s? Have you ever asked yourself what the real value of all your company’s customers is? Here’s a fact for reflection: in 1970, the weight of tangible assets in the stock value of the companies listed on the Dow Jones was 50%. In the year 2000, this percentage had dropped to 20%. These figures have a clear lesson: companies are increasingly valued by intangible elements, among which the customer portfolio has an essential importance.
For a long time, techniques have existed to gauge a company’s customer portfolio, such as the famous “trade fund”, that “jumble” that appears on every announcement of mergers and acquisitions. However, in the majority of cases, the measurements obey subjective and situational aspects more than a real, true picture of the company.
The crux of the question is not evaluating the weight of the customers when it comes to buying or selling, but rather knowing the customer at every moment, always. The ideal situation would be to know it even from the first instant a company is created. Being aware that the best customer is not always the one that generates the most revenue, but rather the one that has the most value for the company. In the same way that the most coveted museum piece is not always the largest, but rather the most valuable, the most valuable customers are often hidden in sheer anonymity. Art thieves know exactly what to steal… let’s not allow the competition to discover the “master works” in our customer portfolio before we do.
The key is knowing what we call customer value and how we measure it. Some clues: value is customer transactionability; that is, the revenue the customer brings minus the costs he or she generates; value is the customer’s referential power; that is to say, the ability the customer has to attract more customers; value is a customer’s strategic weight; that is, what the company loses if the customer disappears; value is a customer’s potential lifespan in the company… There are a multitude of methods for measuring value not in an arbitrary way, but rather in a rigorously scientific manner. Some distribution giants, such as Wal-Mart or the British company Tesco base their success on a tremendously exhaustive knowledge of these parameters. In fact, Wal-Mart possesses the largest civil database in the world; while close to 20 million people have Tesco’s Clubcard. This tool, apart from accumulating points for the customer, has allowed the multinational to divide its users into close to 5,000 segments, to which it offers about 300,000 different combinations of offers.
In the United States, Marketing directors are taking on customer portfolio management tasks similar to those of any CFO. Concepts such as Customer Asset Management or Customer Equity confer the same importance on the customer as they do on wealth, financial values, or cash-flow. It is time for these techniques to expand in our country and for Marketing directors to treat the customer as the company’s great asset.
In case there are any doubts, here’s something to reflect on: Do you know if all of your Premium, premier class, or VIP consumers truly deserve such distinguished labels? If you decide to investigate, prepare to be very surprised…