Customers – your most valuable asset

The ‘capex’ process follows the principle that a business case is required to motivate the purchase of a particular resource. The business case explores the need, the optimum way of financing it, how its impact or contribution can be measured, as well as the timeframe. The approval of such an item is done by senior management or even at board level. Once approved, and the item has been purchased, the following lengthy process takes place on its arrival:

• The item is recorded in the asset register.
  
• The item is placed in its location.
  
• An individual or department is allocated the task of understanding how it works.
  
• The individual or department is then tasked with the responsibility for the item.
  
• The item is also applied to the amortisation formula, indicating its lifespan and value.

This applies to most assets – except the customer.

In South Africa the marketing approach up to and including acquisition compares with the best the world has to offer. Brands are well established and effectively presented. Most brands’ positioning are appropriate and clearly stated, with the awareness element of the marketing mix being comprehensive.

Leaking bucket

So it’s safe to assume that the marketing plan is generally well put together. Time and time again, marketers have been successful up to and including the acquisition aspect of marketing. At the moment, we are out there every day with our marketing spend, effectively buying customers over and over again.

And yet when we get a customer, we let them get away – the leaking bucket syndrome. The adage that it is far more expensive to acquire a client than it is to retain a client should seriously question the logic behind our repetitive acquisition strategies.

Now, if we related a marketing budget to a capital expenditure budget, then surely, an amortisation formula is a must. In the case of the customer as an asset it would be of an appreciation nature rather than depreciation. The amortisation formula can only be applied if we hold on to the asset, hence…

A case for CRM

Simply put, CRM – customer relationship management – is an approach to the customer. The principle behind the term is to identify and retain the best profit potential, while attracting more of the same. This could be summed up as an organisation mind set originating from the helm and filtering down through the organisation, so as to form a customer-centric culture.

By definition therefore, CRM is not a software package loaded onto a hardware box, nor is it a marketing specific function or a process only relevant to certain organisations. CRM is rather a culture that needs to be embraced by each and every organisation.

Once the mind set has been achieved, the next step would be to identify all customer touch-points throughout the organisation, as these areas will be used in streamlining continuity as well as fostering a relationship. The touch-points are the customer’s point of entry to an organisation.

Build knowledge

These environments are the origin of interaction and information collection. We should use them to build on our knowledge of the customers’ needs and wants - gathered over time - using the learning relationship concept to enable a higher degree of relevancy to take place. Relevancy breeds loyalty and a greater receptiveness to cross-sell and up-sell approaches.

So, under the analogy of the capital expenditure process, once prospective customers (assets) arrive at a particular touch-point, the process should record them on the asset register – effective asset management.

Time and time again, organisations should be capitalising on the fruits of their efforts by maximising the potential return of the customer over time. A well-executed CRM programme will deliver lifetime value. The definition of lifetime value of a customer is the ability to nurture a relationship until the profit potential has been exhausted. At this point the customer (asset) is effectively amortised and is ready to be discarded through an aggressive exit strategy. Once again, effective asset management.

Measure it, manage it

The prerequisite is the measurement aspect of CRM – if you can measure it, you can manage it. It factors in acquisition cost, and is able to deliver an accurate cost-to-date versus income generated analysis on request. This aspect should be of particular interest to listed companies or organisations participating in mergers and acquisitions, in that this provides insight into current value with future potential.

The argument here is that if a CRM strategy as envisaged above was to be presented to analysts, it would potentially move the value of a share. May CRM find itself alongside the brand equity on the balance sheet.

CRM could be the springboard to take the strong foundation created by marketing in this country even further… Do you have the courage to evolve?