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 Measuring
Customer Equity™
By Gary Getz
Author, Customer Equity
Director, Integral, Inc.
Just
like plant and equipment, oil fields, and loan portfolios, a
company's customers have a financial asset value that can be
measured, managed, and maximized -- a value that we call Customer
Equity™.
While the idea of managing customer relationships is not new,
and various approaches to measuring customer value have begun
to be used, only recently has it been possible to do this in
more than a blunt, aggregate sort of way. The key enabler of
Customer
Equity™
management at the level of individual customers is information
-- customer purchase and behavior data, real-time information
on customer asset values given to salespeople and customer service
representatives, and information given to customers that shows
that companies have invested in knowing them and their needs.
In a frictionless world in which customers and consumers can
have near-perfect knowledge about their alternatives, and it
is possible for marketers to know customer asset value and behaviors
at an individual level and tailor offerings accordingly, mass
marketing is rapidly giving way to information-enabled markets
of one. In an Internet world, customers also have the ability
to self-tailor what they buy -- if only manufacturers and service
providers will let them.
In the emerging world of markets, savvy competitors will focus
on knowing the value of individual customers and tailoring marketing
programs to maximize the asset value of each customer relationship.
Ultimately, we should expect to see the mass customization of
the entire marketing mix for markets of one. Marketers who continue
to deal at the aggregate or mass market level in this emerging
world will die the death of a thousand cuts as more targeted
competitors steal away and retain the most profitable customers.
As in so many areas, today's smart decisions will not be enough
in tomorrow's disruptive world.
What should companies do?
- First, develop the capability to measure the asset value
of customers, throughout their lifecycles as buyers.
- Then, use this information to match the cost of customer
acquisition, retention, and add-on selling programs to customer
asset values.
- Next, use behavior and purchase data to manage customers
(and their value) through their lifecycles with you.
- Climb the staircase of e-brand value -- from credibility
(you do what you promise), to anticipation (you got ahead
of my stated need), to honesty (you acted in ways that put
my interests first), to relationship (you know me as an
individual). Passive Internet marketing strategies will
not be enough.
- While building the capacity to tailor your offerings to
markets of one, also build your electronic market presence
in a way that allows customers to self-tailor.
Managing Customer Equity™ as a way of life calls
for significant changes in management systems, beliefs, capabilities,
and actions. But failing to address the opportunity to build,
and then harvest, the inherent asset value of customers will
leave the door open for others who do.
About the Author
Gary Getz is a Director at Integral, Inc., and the co-author,
with Professor and Integral Affiliate Robert Blattberg and Professor
Jacquelyn Thomas, of Customer Equity. |
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