The relationship between building customer loyalty and shareholder value
Can you offer some tips for building customer loyalty and shareholder value
I think the question would be tougher if you asked it this way: Can you offer some tips for building customer
build shareholder value? To me, the two are completely intertwined.
Whenever we are talking about the value of customers, what we are really referring to is the way
that companies make money -- create revenue, generate costs and build profit, and generate value
for the shareholders. We're talking about two forms of value that come from customers. Customers
are, if you think about it, the only source of revenue, by definition, that a company has. If
that's the case, then we have to look at both ways that customers create value. The first way is
that customers pay us money right now; we make money from them this quarter. Most companies are
pretty good at measuring and managing that. But there is a second way that customers create value.
Customers, based on their experiences today, are more or less likely to do more business with us in
the future, to recommend the company and the products to their friends and otherwise create value
in the long-term. Most companies are woefully inadequate at measuring the future
value of customers
and the value that's going to be created for shareholders from those
customers in the future, as of today. And yet, once a company starts doing that, building customer
trust becomes an imperative, because you are never going to build the future value of customers
unless customers trust you in such a way that they will come back over and over and they will say
good things about you to everyone they know.
We think it's inextricable to think about customer loyalty and shareholder value together. They
come in the same breath, the same thought – we cannot build future value for a company without
having customer loyalty and therefore building shareholder value.
This was first published in October 2008