Tag Archives: customer equity

Valuing Customer Value Management

Customer Value Management (CVM) is widely undervalued in the way we practice customer experience management (CEM). Excellent resources on the CVM topic abound, yet few executives &#8212 and even few CEM professionals — are aware of them. Sometimes CVM seems too quantitative or difficult to grasp or implement, but the companies that have distilled customer value management principles are certainly reaping higher value for their stakeholders, especially customers! In addition to step-by-step calculations for customer lifetime value, return on customer, customer equity, customer value-added, and other essential metrics, CVM literature provides practical advice that is absolutely necessary for managing customer experience right.

Firms of Endearment (by Sisodia, Sheth & Wolfe) explains how "endearing companies tend to be enduring companies". By asking a broad sample of people which companies they love, and then working backward to identify those companies’ collective, distinctive set of core values, policies, and operating attributes — and then their return on equity — amazing findings resulted. The firms of endearment (FoE) list includes the usual suspects, and then some: Amazon, BMW, Caterpillar, Google, Harley Davidson, IDEO, IKEA, JetBlue, Johnson & Johnson, LL Bean, REI, Trader Joe’s, UPS — to name a few. "They actively align the interests of all stakeholder groups, not just balance them … and can do seemingly contradictory things such as pay high wages, charge low prices, and get higher profitability." Indeed, the financials seal the deal: " the public FoEs returned 1,026 percent for investors over the 10 years ending June 30, 2006, compared to 122 percent for the S&P 500; that’s more than a 8-to-1 ratio! Over a 10-year horizon, FoEs outperformed the Good to Great companies by a 3.1-to-1 ratio." Continue reading

Customer Value Creation Essentials

Value creation is perhaps the single most important aspect of any executive’s job. As such, crystal clarity on what it is and how it’s done should certainly be top of mind. Shareholder value is fueled by customer value; shareholders leave when customers leave, not the other way around. Customer value is an ambiguous term, as it can be used either from the company’s or the customer’s perspective. Few companies know the lifetime value of their customers, or collective customer equity, and more importantly, fewer still know how much customers value their brand, and why.

Why care about how much customers value your brand? Because the customer view of the company’s value is a predictor of market share and shareholder value. Vodafone’s Graham Maher, Managing Director, says “The Customer Value Management (CVM) score is a leading indicator of Vodafone’s market share. We were able to predict market share a quarter out using CVM data, to within 1% accuracy! In fact, the Finance Director said the CVM score is more robust than any of our financial Continue reading