When we look at the balance sheet, we look at what we think shows us our assets. The reality is that most of the time where missing the asset that is right under our nose – our customers.
Once you create a loyal customer base, it’s tough for a competitor to take that away.”
– Joe Mansueto, Founder and CEO at Morningstar Inc
The reason for any business or organisation to exist is for customers. For without them there is no reason to exist. It is the momentum of your customer base that helps you to play the long-game – not the short-termist cost-cutting that makes the management reporting look good.
We Need To Think About Assets In A New Way
Having a loyal customer following is one of the most important parts of your business alongside strategic management and accurate planning (amongst other disciplines). In fact, when many investors start looking at either purchasing or investing in businesses the first thing they look for is the stability of the customer base and the repeat purchase and loyalty that comes with it. Any business that doesn’t have a strong, stable customer base is probably one that isn’t worth investing in at any great rate.
So, if customers are truly an asset of the business, how can we quantify the size, shape and scale of this asset? For other asset classes it Is pretty straightforward – you can see buildings, you can see cars, you can see your inventory, but customers aren’t something that you can easily quantify.
Customer Advocacy – A Proxy For Quantifying The Customer Asset
If we can understand the proportion of our customer base that are advocates of our product or service, it gives us a clear insight into how strong that business is today and the likelihood of its continuing success in the future.
Similarly, if we understand the assassins operating in our customer base and the scale of those assassins compared to our advocates, we can really start to see a trend and take some action in our businesses to generate that long-term improvement and build ‘customer’ as an asset base.
The Best News – None Of This Is Difficult
It just requires a new way of thinking about how we class assets and reward effort in business and organisations. The ones that are doing it well – the disruptors – are doing nothing more than understanding that the network effect of strong customer advocacy can redefine industries.
The only thing holding us back is our failure to reframe what we already have. This is where it helps to bring a specialist on board to help you navigate the journey.