Irish Businesses Risk Destroying Valuable Customer Equity

‘Crisis of Short-Termism’ Rampant in Business today, says Business Guru

Dublin, Ireland, 08. Feb. 2010 -  Irish companies are putting their long-term profitability at risk by adhering to outdated marketing strategies that needlessly destroy valuable customer equity, a global business strategist and marketing expert told Irish businesses at a recent briefing hosted by SAS Ireland and the IDMA. Dr. Martha Rogers, author and founding partner of Peppers & Rogers Group, says that many Irish businesses have yet to grasp fully one of the major lessons of the current recession – that all business decisions and marketing activities must have as their objective to maximise current and long-term customer value.

Dr. Rogers maintains that customer equity – or the willingness of customers to do business with a company in the future – is the most important measure on which to value a business. She states that tomorrow’s most successful Irish companies will be those that create customer value by anticipating customers’ needs and meeting those needs better than their competitors. “Businesses can achieve tremendous competitive advantage  by adopting a ‘return on customer’ approach and focusing less on short-term financial measures, which can ultimately lead to the destruction of a company’s long term customer equity base,” says Dr. Rogers. 

 “All of a company’s revenues come from its customers - the customers it has now and the customers it will have in the future - not its products, brands, stores, employees or campaigns. These customers are a company’s scarcest resource, so a company needs to ensure they have effective measures in place to determine the value of their customer base. They need to understand their customers’ actual value today and their potential value in the future in order to know whether their marketing and business activities are creating or destroying customer equity.”

Dr. Rogers states that Irish companies must have an accurate understanding of the value they are creating or destroying or they risk making many of the disastrous mistakes that have been observed throughout the current recession.  She says, “Underlying this must be a commitment to ensuring customer interactions are relevant and customer experiences more tailored and positive. This is even more important in a world of instant, mass communication in which customers talk to each other and share their experiences electronically with millions.”

“We also need to understand that some customers are more profitable than others. When this underpins a company’s business model, the firm starts making better decisions about the best use of resources in order to ensure good customers are not subsidising bad customers - after all, why should the best customers pick up the tab for the worst customers?  The technology is now available to determine the profitability of individuals and small groups of customers, allowing companies to focus on making money on every customer in the short term and the long term, instead of trying to sell products to just anyone who will buy. This is the only long-term way to maximise the profit and equity value with every customer, thus increasing shareholder value.”

Alan Gormley, Customer Intelligence Consultant, SAS Ireland states that many Irish companies have just gone through 18 months of finding out that customers are their scarcest resource. He says, “Businesses were unprepared for the sheer number of customer desertions that occurred as the recession took hold and customers started to question prices, value and service. Customer retention, profitability and pricing are now more a priority than ever because acquiring a new customer can cost 6–7 times more than retaining an existing customer.”

  “Companies that invest in their customer equity base today are those that can come out of this recession with improved customer loyalty and market share. For many Irish companies, this requires a realignment of their customer strategies to deliver more personalised services based on an accurate knowledge of individual customer requirements and patterns of behaviour. This is where SAS’ customer intelligence solutions come to the fore in assisting organisations to determine and drive customer value by encouraging companies to embrace the 3-I’s – customer insight, interaction and improvement – as the key to growing long-term profitable customers.”

1. Insights - SAS allows companies to use the data they collect to gain greater insights into what customers need, what they are about to do, who is going to leave next quarter, which customers are most profitable and who’s in a position to buy a second product.

2. Interaction – SAS’ solutions automate the tools for executing communications based on the above insights and ensure companies deliver relevant, personalised communications and are in front of the customer when he/she is deciding to buy a product.

3. Improvement – SAS allows companies to match their marketing initiatives over time with sales and determine what works most effectively to drive greater market performance. This allows companies to ensure that marketing spend is targeted to maximise the overall profitability of the company’s customer base as opposed to concentrating solely on customers who are the most profitable as these customers may not deliver the optimum return on marketing spend.

SAS Customer Intelligence
SAS Customer Intelligence solutions provide the most comprehensive suite of analytic marketing solutions to business around the globe, enabling companies to make smarter decisions and solve more business challenges. SAS provides the complete set of capabilities needed for a customer-focused marketing process, allowing companies to deepen their customer insights, choreograph customer interactions and continuously improve their organisation’s marketing performance. Companies using SAS Customer Intelligence solutions operate across every sector of the economy, including financial services, communications, retail, healthcare, insurance, manufacturing and utilities. 

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