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Stimulus Checks and Customer Strategy
If the U.S. government is considering handing out checks to the general populace, then there's no denying that an economic downturn is at least on the minds of lawmakers and the public. Interest rate cuts and other measures to stave off a recession make top news these days. Don Peppers and Martha Rogers, Ph.D. see this as an opportunity for businesses to work toward building customer value in both the short and long term.
Today's lead 1to1 Weekly article highlights a key point in their new book, Rules to Break and Laws to Follow. A company's primary responsibility -- to its employees and shareholders, as well as customers -- is to create the greatest possible value from the customers and prospects available.
An economic downturn will uncover all the failings inherent in capital-centric, Wall Street-obsessed, short-term focused behavior. Customers are the only source of organic growth for a company, and they are a scarce productive resource, like capital or labor. Companies like Costco and FeeDisclosure.com are using this idea to build customer value that can weather both good and bad economic times.
What firms have you encountered that excel at creating customer value?
Elizabeth
The economy is a complex adaptive systems whose future direction is self-evidently difficult to predict. None more so than at the confluence of turbulent financial markets and an approaching recession. But the economy does display recognisable patterns of behaviour that economists use for forecasting. But that doesn't mean that Don & Martha can make sweeping generalisations about value creation like they did in their leader.
Let's take a step back and look at some corporate valuation fundementals set out in a couple of recent analyses.
As most financial commentators recognise, whole industries and individual companies within them go through lifecycles. Over time, the fortunes of most companies revert to a mean where ROIC is equal to WACC. Some companies do much better, but the analyses carried-out to-date have largely failed to find hard-and-fast factors that drive persistently superior results (and that don't fall foul of the Halo Effect). Michael Mauboussin of Legg Mason Capital Management describes this graphically in a couple of recent papers on Death Taxes and Reversion to the Mean and ROIC Patterns and Shareholder Returns.
What this means is that it is very difficult to systematically pick stocks of companies that will do better than average in the future. (I think we all knew that!) And that applies even more so in these economically challenged times. It also means that it is equally hard to say with any degree of statistical surety that focussing on creating customer value (with its necessary balance of value given and value taken) leads to persistently superior shareholder returns.
Where is the financial or other quantitative evidence that Don & Martha use to justify their exuberant prognostications?
Graham Hill
Independent CRM Consultant
Interim CRM Manager