Customer Value Investment by Gautam Mahajan: A Tool to Understand Customer ROI

What exactly is the value of a customer? Most companies do not understand this concept or its value. Associates who work for companies on the frontline somewhat get it, but in reality they do not see the customer as an asset that can either be increased or diminished over time.

Gautam Mahajan published Customer Value Investment in 2008 discussing the importance of the customer for any business. I have known Gautam through social media for a number of years and respected his work, but never had the opportunity to meet him and create a personal relationship. I live in Manhattan and Gautam resides in New Delhi, India. When Gautam was planning in trip to lecture at Fordham University at their Frontiers in Service Conference, I seized the opportunity to meet him in person as there is no substitution for a face to face experience. We became instant friends and knew we were on the same page about the value of the customer. Customer Value Investment, although written almost ten years ago, remains consistently relevant today.

Here are some highlights of what is covered in the book. Each of these are valuable, go hand in hand with my eight steps, and are on-topic with Customer ROI:

• Most investments to improve customer loyalty are inexpensive; they are more about doing the right thing from the customer’s viewpoint

• Most companies do not have a strategy for increasing sales from existing customers

• The customer is a person and has to be known and touched. They have to feel wanted. Companies must find a way to know their customer. If you do not know your customers, answering the question, “who is my customer?” is very difficult

• Customers are assets; if they buy from you again, the asset increases. If they purchase less or not again, the asset decreases

• The best definition of service is providing whatever makes it convenient for the customer to achieve his/her goal

• Value is what a product or service is worth to a customer. If you add more value, you will retain customers. If you take it away, you will lose customers to your competitors

• Frontline associates are generally the lowest on the hierarchy totem pole however, they are the most important, because they are the ones that touch the customer and are closest to them.

• It is important to put customers in control. Your company must know what irritates a customer and find a way to create a more seamless experience

• Always find a way to say “yes” to a customer if the customer asks, “can you?”

The book is told through stories related by a fictional Customer Guru consultant. While the book is very insightful, I found it to be an easy read. One of the many takewaways found inside are valuable formulas for calculating Customer Value. Gautam stresses that most companies do not even know who their customers are, especially those that sell through distributors, dealers and retailers. Customers are a company’s largest and most valuable asset and the best way to leverage this asset is by knowing your customer, developing a strategy to increase market share from your existing customers, and making investments to block competition from chipping away your customer base.

Gautam concludes with, “In the old days, it was how loyal are the customers to the brand.” The new reality is, “how loyal is the company to its customers?” These are words of wisdom from a person who knows!

Do you know how to compute your company’s Customer ROI? Read Customer Value Investment by Gautam Mahajan to learn how.