Improving Shareholder Value Through Customer Equity

Customer equity functions in a positive perspective of the company, its offerings and its employees.  Customer equity has significant worth to companies that desire to encourage customers to continue to pay for products and services that raise shareholder value, firm growth and employment prospects. A study by Shultze, et. al. (2012) found that increases in customer equity have a larger impact on shareholder value. It is this shareholder value that is used for reinvestment for future growth and opportunities. 

Customer equity, marketing practices, and revenue are closely associated. When customers consider their total impressions of a company and its offerings they will naturally consider purchasing or not purchasing the product or service again. Customer equity raises the likelihood that they will make a decision to purchase again…and hopefully again and again. This correlation of marketing metrics, customer receptivity and stock value has been associated in a number of different studies making them loosely tied together (Srinivasan & Hanssens, 2009). 

Customer equity is forward looking trying to determine the financial value of retaining customers into the future. Sometimes this is three years and other times it may be a lifetime. The way in which marketing and the quality of the product/service the customers receives will naturally have an impact on whether they are retainable.  Retained customers are simply worth more in terms of ROI costs than new customers and create a base by which the company can grow. 

 Marketing effectively to important customers, maintaining a relationship with them, and servicing them well are important for retaining their patronage.  Many products and services have a shelf life and cycles that encourage repurchasing. For example, a person who likes cars may buy a new one every three years while a person who enjoys a certain food product may buy it every week. The lifetime value of a customer is its total value calculated out over a certain period of time. 

The researchers found that there is a 1.55 ratio of customer equity and shareholder value from data pulled from 2,000 companies over 10 years. In other words, when customer equity increases 10% it also has a 15.5% impact on shareholder value. Changes in customer equity and shareholder value are impacted by debt and non-operating assets. These concepts should be integrated into their analysis of value contributions from marketing actions. Using stronger customer metrics will help determining improvements in developing customer equity. 

Schulze, C. et. al. (2012). Linking Customer and Financial Metrics to Shareholder Value: The Leverage Effect in Customer-Based Valuation. Journal of Marketing, 76 (7). 

Srinivasan, S. & Hanssens, D. (2009). Marketing and Firm Value: Metrics, Methods, Findings and Future Directions. Journal of Marketing Research, 46 .

 

Webinar: Organizing And Delivering Advising: Models for Success

Date: April 2, 2014 3:00-4:30 EDT

OVERVIEW
Successful academic advising programs do not just happen. They are based on well-thought plans that focus on student success. This session will review five critical planning elements including:

- Developing an advising mission statement that derives from the institutional mission statement
- Understanding how advising integrates with other services
- Identifying relevant goals and objectives for advising
- Identifying an organizational model best-suited to goal achievement
- Delineating how advising services will be delivered

This webinar is part of the series, Academic Advising Programs: Strategies For Success.

OBJECTIVES
- Be introduced to the Council for the Advancement of Standards in Higher Education (CAS) Standards for Academic Advising
- Understand the importance of designing an advising program consistent with institutional mission
- Begin to articulate advising program goals and objectives consistent with the institutional mission
- Understand the seven organizational models and the strengths and weaknesses of each model
- Understand one-to-one, group, and technology delivery systems and the strengths and weaknesses of each system

This webinar can be purchased individually for 345 USD or purchase the 4-part series for 995 USD.

Web address: http://www.innovativeeducators.org/product_p/2140.htm

Business Propositions and Customer Experience Create the Service Concept

The business proposition and the customer’s perception of that proposition create the service concept. It is a mutual and shared understanding taking into consideration both vantage points that blend into a total picture. What the company is offering (business proposition) may be perceived differently than what the customer experiences (customer perception of service). The two perspectives create a true service concept.

As an example, a restaurant may offer a friendly environment with high quality food at an affordable price. The customer frequents the restaurant and experiences rudeness by the staff with mediocre quality food at an affordable price. The business proposition and customer perception do not match and this leads to dissatisfaction and lost future business.

Perhaps there were some recent changes in the business? Due to slow sales and lackluster profits the restaurant decided to reduce dish quality and keep the price at previous levels. They have also cut back on training and are pushing their workers harder in an effort to return to profitability. They have unintentionally changed the nature of their business and may need to rethink their strategy and business propositions if they continue to lose customers.

Before one can truly rethink their business offerings it is necessary to delve into the nature of what they are truly offering customers within the market and how to improve upon those offerings. For example, the atmosphere may be more important than the quality. Likewise, the way the food is prepared and displayed may be more important to customer perception than the actual quality.

Understanding precisely what your customers want is important for maintaining a stronger shared concept of your business. Value propositions are not simply a list of benefits but THE few reasons why customers would choose your business over any competitor. Collaborating with industry stakeholders can help in finding more value in the business’s main business propositions (Anderson, et. al. 2006).

The service concept is simply just a mental picture of what the organization is offering.  It can be defined in a dictionary as “an idea of something formed by mentally combining all its characteristics or particulars”(1). This means that both the customer perception and business proposition are subjective by nature and are enhanced through adjusting the strategies and offerings to change the association of images (concept). 

Business propositions are enhanced by aligning organizational resources to root value that is in turn sold on the market. It is beneficial to work with industry stakeholders to find more value in the businesses main propositions (Anderson, et. al. 2006).  Listening and understanding customers needs along with the supply and development of serving those needs through value proposition enhancement is important for capitalizing on the service concept.

One an organization understands their true value propositions they can work on developing their marketing concept that runs as a theme throughout their business and into the main marketing message (s). The marketing concept can be described as a management philosophy that helps organizations understand their own needs and the customer needs in the achievement of their objectives (Johnston & Clark, 2008). Somewhere along the line both the organization and the customer need to be drawn into this shared concept.

The central message of any marketing campaign must be in alignment with the service concept. If customers are expecting something different than what is being offered they are likely to be dissatisfied. If they experience something greater than what is expected they are likely to be satisfied. This satisfaction or dissatisfaction has a huge impact on the success of businesses and possibilities for future growth.  Do you know what your business is truly offering?

Tips:

-Define 2-3 propositions your business currently offers.

-Understand how your customer views your offerings to create the service concept.

-Redefine your business propositions for maximum value and revenue generation.

-Conduct a market analysis to determine if those 2-3 propositions have maximum value.

-Strategically align the organization to the new 2-3 propositions.

-Sell those new propositions through marketing.

-Review the performance of the organization.

-Review and adjust the propositions as necessary for future growth.

Anderson, J. et. al. (2006). Customer value propositions in business markets. Harvard Business Review, 84 (3).

Johnston, R. & Clark, G. (2008). Service Operations Management: Improving Service Delivery. Prentice Hall; NY

Call for Papers: Business Strategy and Social Sciences

August 16-17, 2014

Conference Main Theme:   Issues concerning Business Strategy and Social Sciences field towards sustainable development

The International Conference on Business Strategy and Social Sciences is organized by the Asian Economic and Social Society, and Pak Publishing Group. The purpose of this conference is to bring together researchers from around the globe in order to present and discuss new trends in the fields of Business Strategy and Social Sciences.

All selected papers will be published in a book with an ISBN (978-969-9347-16-0)  by Pak publishing Group.

After conference presentation a few selected papers will be published in the special or regular issues of the ISI and Scopus indexed journals.

Submit Paper

Developing Socio-Cultural Awareness in the Military

Sociocultural awareness is becoming more important in the military. At present there appears to be sociocultural gaps in military leadership development. The researcher Janice Lawrence believes that leaders will be called upon to engage socially across many different cultures and to build trust, create alliances, read intentions, and influence and understand people and their motivations (2011). This type of learning is fundamentally different and higher than previous learning. 

For decades the military has been at the helm of leadership development. The wars in Iraq and Afghanistan have highlighted some gaps. The development of higher sociocultural awareness helps leaders understand the local population, their needs, and their motivations. To create greater cross-cultural awareness requires skills in empathy, respect, genuine interest in others, flexible behavior, tolerance for ambiguity, open-mindedness, sociability, and initiative (Early & Ang, 2003). 

A failure to be culturally aware means that leaders may not be aware of the deeper issues at play. As all language contains a coding, transference and decoding process of signals it is necessary for leaders to understand the non-verbal cues of the local population to understand their emotions such as anger, happiness, disgust and many other facets to get a deeper picture of the local population. 

Situational awareness is important to military leaders but so is cultural awareness. It cannot be easily documented in a photograph or satellite picture. It requires an understanding of interests, habits, intentions, beliefs, social structure, and political systems (McFate, 2005). It is a subtle skill that should be rewarded in military training. 

There is a natural blending between military and social science. Leadership exists within a medium of culture. Culture is not finite or immobile and doesn’t exist by the same standard rules one might find in other sciences. The author indicates that sociocultural competence should be rewarded in the military as its impact in saving lives may be more profound than other methods.  To understand the situation and the people that have a natural impact on that situation can do much in being more effective strategically, socially, and militarily.

Comment: The subtle tones and non-verbal expressions can give an indication of how a person is receiving, interpreting, and adjusting to new information. When engaged in cross-cultural communications the specific nuances of human expression may be more important in determining intention than the words themselves. Understanding the local population, how they view the situation, and their likely actions, will help in improving upon effectiveness. Social skill at a deep neurological level that creates awareness is difficult to train but can be fostered. 

The same process applies to business leaders that may not have a strong grasp of the culture and the associated cognitive models within their workplace. It is possible to find workplaces where there are 2 or 3 different cultures that interpret information differently. Strategic changes will naturally have a different impact and interpretation to each of the different cultures. Understanding how a new strategic plan will be interpreted will impact its business effectiveness and the success of the organization.

Earley, P. & Ange, S. (2003). Cultural intelligence: individual interactions across cultures. Stanford, CA: Stanford Business Books. 

Laurence, J. (2011). Military leadership and the complexity of combat and culture. Military Psychology, 23

McFate, M. (2005). The military utility of understanding adversary culture.  Joint Forces Quarterly, 38.