Customer Value

December 2nd, 2008

In todays economy it critical to preserve customer value. The key is earning and keeping customer trust. Understand that your business creates or destroys customer value with every decision it makes and every action it takes. Every customer contact and interaction is vital. There is a good chance that customer value is either created or destroyed based on some action taken by someone in your organization.We know someone who recently had some work done on their house and the quality of the product installed was poor. They needed resolution to the issues. The communication from the company was as if they didn’t exist and didn’t matter. Their recourse was to withhold an amount in an attempt to get some resolution to their issues and concerns. In response, the company sent a notice of an attempt to file a mechanic’s lien. The salesman who sold the product knew of the pending action and never called in an attempt to settle the matter.

These people were justifiably upset. The president of the company ultimately apologized, but by then the damage was done. The amazing thing is the company could have gotten paid on time if they had done things right in the first place and listened to the customer. The president instituted the new collection policy to accelerate cash flow when he should have taken more time to make sure his people were listening to customers and taking care of their concerns.

It is important to realize that customers are no longer just connected to companies in business transactions. They are strongly linked and connected to other customers. Customers talk to other customers. You can no longer manage your business on a customer by customer basis. The actions described above will severely damage the company’s future business. This is a perfect example of burning customer trust and throwing it out the window.

Every customer represents potential future cash flows. Your future revenue is linked to how potential customers will behave. Each customer has a life time value which you can translate into the net present value of all future cash flow attributable to each customer. This can be further extended to the contacts of these customers. Customers represent your most critical asset and resource which are essential to the survival of your business. When there are only so many customers you can’t upset them. When you drive customers away you end up destroying the life blood and long-term value of your business.