Is your company able to visualise the value of your customers?

The customer is a secret and weird phenomenon. A Volvo dealer with four branches was facing this reality. As the profiler team of Hartwin Maas and Gerald Boss had actually analysed the value of the customer base of each branch the result was shocking for the owner and the board of management: Of all things, the branch rebuilt with huge effort proved an empty core. Corporate value: Zero. And the branch which the dealer actually wanted to abandon for already a long time would pass any Basel II doubt immediately.

Solvency and the future of a company cannot always easily be explained by turnover and profit but rather all-too-true with the quality of customers. In fact there are many SMEs which are sitting on a treasure of gold without even knowing it.

Analysts, credit personnel and auditors just see a company as product-oriented. Simplified, a hotel for instance is an accommodation machine, whereas, the accommodation is finally only the product. The 4-Star Hotel "The Golden Aquarius" with 260 rooms for example had a booking quota of almost 80% and hit the spot as a cash cow. The neighbouring water amusement park which was run by the hotel, however, was the problem child for accountants and owner. Because of this they decided to shut down the water amusement park with a heavy heart. In the following year, the book-ing rate of the hotel The Golden Aquarius sunk by an alarming 20%. Obviously, the customer as always being right has nothing to do with business administration. By all means, a customer analysis showed exactly this: Almost all customers were on the jump, as the water amusement park was of vital importance for the accommodation.

It is the old problem: The one who only holds the money-spinner in the assortment and abandons the bums because of cost reasons is risking the attractiveness of the whole. The streamline thinking of finance-driven business management is leading straight into a trap if the customer is directly involved. Customer profitability even comes before product profitability, as long as the human factor at all is part of the business. Apparently, there are some age-groups graduated from busi-ness studies that were denied such insights. As analysts or controllers they prefer to base their decisions on seemingly objective cost and reve-nue accounts. Nowadays they are pestered by the implementation of the therapy programmes which are called CRM (Customer Relationship Management) or short and firm CM (Category Management). These programmes are only half the truth.

The bigger a company is and the more levels divide the top from the customer base, the more abstract and colder decisions are made. Then the attention to the customer is even sometimes felt as bothering. To turn this around, it is more necessary than just a new management position as for instance the CRM. And more is needed than meaty slogans like the customer is the most risky asset in a company. Arguably, the customers should be seen as the strategic assets of a company. But the statement stays unheard if these assets are not made visible, if they cannot exactly be depicted, monitored and the date purposeful applied.

There are four basic dimensions of customer as-set. Basically it is a matter of the comprehension of the indirect and direct cross-selling effects, the indirect and direct reference value, the acquisition rate and the retention rate. Metaphorically speaking it means how many kilometres of detour is a customer willing to make for a specific accommodation or how much frustration seems to be acceptable during a visit of a particular car dealer.

Depending on branch, corporate size and location there are diverse gathering and computation methods. While assessing the customer base not only the current, but also the potential customers are important. The part of new customers as well as the number of decreasing or lost customers flow into the calculation. Either way – in the end eventually, Boss & Maas's client has an airtight result at his disposal, which gives information about the corporate value with the economic value of each particular customer or customer segment.

Based on their Customer Value-Based Model, from the basics to the concrete application – that is the performance of the Boss & Maas team.

It is getting interesting if the client derives his corporate and management objectives from this result. To which extent they are achieved, can then be conducted by the effect analysis after twelve months. Apparently, a minimal increase of the retention rate generates a massive improvement of the corporate value. Successful cross-selling activities can amplify distinctly the stability from one year to the other. And increasing reference values can even directly be concluded from the number of new customers.

When it comes to a sale or an acquisition of a company – the corporate value cannot only be derived from the value of the customer base. The shareholder value is still one of the most significant parameters. The shareholder value method focuses on turnovers and computes all compo-nents which are not customer-specific. Therefore, it is rather a product-oriented method. But basically, the method fails in the direct connection to the customer as the source of value creation. Boss & Maas count on the evaluator's sense of reality and advice, to combine the shareholder value method with the customer lifetime value method. This sometimes provides surprises because both methods lead regularly to different results. Especially in personnel- and contact intensive business areas the Customer Value-Based Model of Boss & Maas leads frequently to entire new negotiating positions, if for instance a credit is arguable or an investment impends to fail.

The additional benefit of applying the Customer Value-Based Model is the opportunity to monitor the corporate value, visualize customer value and to increase sales by implementing customer-oriented strategies. That the Boss & Maas's loop pays off is beyond all questions for the previous clients of the young team: The consumers and customers of a corporation are essential of its value. Turnover and profit are merely abstract aspects of this value. They begin to live if one can imagine who has made the sale: The customer.

Boss & Maas established a way to compute how important your customers are and visualise their value in a financial € figure. This does not only show your company the direction to follow, but also indicates the way to achieve the company's objectives.

Boss & Maas helps SMEs to visualise their customer value due to improve and sustain their competitive advantage. Boss & Maas is a young and ambitious international team and is focusing on SMEs. Located in Arnhem, the Netherlands, the team is characterised by a high flexibility for clients in different countries and industries. Those industries involve both, B2B and B2C markets. Boss & Maas creates value which can be sustained over the long term for shareholders, employees, customers and business partners.

Boss & Maas
HAN Kenniscentrum
Beverweerdlaan 3
6825 AE ARNHEM
The Netherlands

phone +31 (0)26 3691 705
fax +31 (0)26 365 8126
web www.boss-maas.com

Hartwin Maas
mobile NL +31 (0)6 38 48 96 45
mail hartwin.maas@boss-maas.com

This release was published on openPR.