The Customer Asset: Understanding and Managing its Value (Palgrave Studies in Marketing, Organizations and Society)

This book delves into the concept of customers as financial assets, explaining how firms can assess investments in customer relationships. The authors present the VARIED framework for quantifying the customer asset, enabling marketers to devise strategies that enhance its value. Crucially, these strategies' advantages can be communicated in financial terms to non-marketers, instilling accountability in marketing and augmenting firm value through well-informed investment decisions. This methodology offers a practical avenue to enact the strategic concept of customer centricity. It will resonate with marketers, accountants, and all managers eager to demonstrate customers' financial worth to the organization. Definitions 7 Contents 9 List of Tables 13 1 Introduction: What Is the Value of Your Customers? 14 1.1 Seeing the Customer as an Asset 16 1.2 Why Does it Matter if Customers are Not Seen as Assets? 17 1.3 The History of CLV 19 1.4 What We Need 21 1.5 Why This Book Is Different 22 1.5.1 Sees Customers as Both External and Internal 23 1.5.2 Unites Disparate Ideas 23 1.5.3 Communication not Math 24 1.5.4 Those Driving Customer Strategy Must Show Its Value 25 References 29 2 The VARIED Tasks of the Customer Asset 31 2.1 (V) Corporate Valuation 32 2.2 (A) Acquisition 32 2.3 (R) Retention 32 2.4 (I) Internal Reporting (Management Accounting) 34 2.5 (E) External Reporting (Financial Accounting) 34 2.6 (D) Data Flexibility 35 References 36 3 The Customer Asset Approach 37 3.1 Principles for Aiding Decision-making 38 3.1.1 The Customer Asset Is a Monetary Value 39 3.1.2 The Customer Asset Approach Is Designed to Aid Decisions 39 3.1.3 What Is Relevant and Irrelevant? 42 3.1.4 Acquisition Costs 45 3.1.5 Prediction of the Future 50 3.2 Prior Perspectives 51 3.2.1 Brand Assets Versus Customer Assets 52 3.2.2 Customers Differ 53 3.2.3 The Shadow of Customer Equity 55 3.3 Estimating CLV 59 3.3.1 The Lost-For-Good Approach 62 3.3.2 Always-A-Share Approach 64 3.3.3 Bespoke Predictions 65 3.3.4 Predicting Customer Life Value with AI 69 3.4 Defining CLV When Customers Are Seen as Assets 71 3.5 Time and CLV 74 3.5.1 Historic CLV 75 3.5.2 Full Life CLV 76 3.5.3 Future Customer Lifetime Value 77 3.6 Does CLV Change Over Time? 77 3.7 A General Approach to CLV 78 3.8 The Customer Asset and Beyond 79 3.8.1 Increasing Direct Financial Contributions 80 3.8.2 Indirect Financial Contributions 81 3.8.3 Non-financial Value 83 References 86 4 Who Is the Customer Asset Approach For? 90 4.1 Marketers 91 4.2 Strategists 92 4.3 Senior Managers 92 4.4 Data Analysts 93 4.5 IT Managers 93 4.6 Management Accountants 94 4.7 Small Investors 95 4.8 Major Investors and Creditors 96 4.9 Financial Accountants 96 References 98 5 Applying the Customer Asset 99 5.1 V: The Customer Asset Approach to Corporate Valuation 99 5.1.1 Corporate Valuation 101 5.1.2 Valuation for Mergers and Acquisitions (Part 1) 106 5.2 A: The Customer Asset Approach to Acquisition 106 5.3 R: The Customer Asset Approach to Retention Decisions 109 5.3.1 Retention Decisions for a Firm Knowing Who Its Customers Are 110 5.3.2 Strategic Decisions That Impact Retention 114 5.3.3 Firing Your Customers 114 5.3.4 The Customer Asset Approach to Developing Your Customers 118 5.4 I: The Customer Asset Approach to Internal Reporting 119 5.4.1 Support of Managerial Decisions Is Not covered by GAAP 120 5.4.2 Managing the Customer Business 122 5.5 E: The Customer Asset Approach to External Reporting 122 5.5.1 Adding Customers Assets to the Balance Sheet 123 5.5.2 Valuation for Mergers and Acquisition (Part 2) 127 5.5.3 Beyond the Core Financial Statements 128 5.6 D: Data Flexibility 130 5.6.1 Minimalist: A Clear, Consistent, and Flexible Approach 131 5.6.2 Incentive-compatible: The Interests of Those Adopting It Matter 132 5.6.3 Communicable: Easy to Explain and Consistent with Other Terms 133 5.6.4 Auditable: Credible Because It Can be Checked 133 5.6.5 Practical: Now Possible to Deliver 134 5.6.6 Future of Generate AI and CLV 136 References 142 6 Communication About the Customer Asset 145 6.1 Communicating with Skeptics 146 6.2 Communicating with Accountants 148 6.3 Communicating with Marketers 148 Reference 150 7 Conclusion 151 Index 154