Answers vary from hiring great talent to inspiring innovation to superlative customer service. While all those factors play a vital role in growth, this book argues that the key force in propelling start-ups from bedrooms to boardrooms is customer equity.
According to Wreden, customer equity is "the value that a customer brings to an organization in terms of sales, profits and intangibles, like referral sales, over the lifetime of a relationship." Customer equity is built on the premise that existing customers are much more valuable than new customers.
Everyone knows that existing customers are most valuable, yet few firms follow through with actions. About 80%-90% of sales and marketing budgets are devoted to customer acquisition, not retention. According to the consulting firm Bain & Co., fewer than 20% of firms track retention.
FusionBranding argues that focusing a business on customer equity pays multiple dividends. First, it increases branding and other accountability by, for example, pinpointing whether marketing campaigns are generating short-term sales without creating long-term customer value. Customer equity also focuses an organization on retention, especially if sales and other compensation are tied to that benchmark. Loyal customers lead to word-of-mouth, the most effective form of branding. Finally, and most important, loyal customers are more profitable. FusionBranding cites well-publicized studies that indicate that a retention increase of only 5% results in a lifetime profit increase of 95%.
Branding is important even for small firms. But too many firms see branding only from the perspective of advertising and public relations. (As an advertising and PR agency executive, I run into this perspective all the time.) While ads and PR are absolutely essential to branding in the mass economy, Wreden believes they are less important in today's customer economy. Because customers - not companies - define brands today, he argues that better branding and other paybacks come from emphasizing customer equity, accountability and operational excellence running from the supply chain to the customer.
Accountability starts with benchmarks that are clearly measureable, not intangibles like "creativity," "awareness" or even satisfaction. The most crucial benchmark is customer equity, but other benchmarks can include responsiveness, percent of revenue from new products and even employee retention. Benchmarks must also be from the customer's perspective. This is part of what Wreden calls "doing business on customer terms." In short, it's not about the ad featuring my company and my products but about the relationship my company fosters with you.
Wreden believes the coming demand economy will spark another wave in branding. Then, the emphasis will be on immediacy, reach and personalization. Immediacy places an even premium on responsiveness. Companies will be able to reach customers through a variety of media, but have to be prepared for customers to reach them at all times, and have to be prepared for accuracy and completeness during each contact. Almost all products will be personalized in the demand economy.
Interestingly, he also examines the challenges of the demand economy, such as dynamic pricing. Unlike other marketing books, which dismiss pricing with a standardized comment about "brands enable premium pricing," FusionBranding devotes attention to pricing techniques and their relationship to customer value. Dynamic pricing, where prices change in real-time according to supply and demand, will present a lot of challenges to businesses seeking to understand all their process costs as well as current market conditions.
Most branding books have little relevance to small businesses, especially those involved in selling to other businesses, because the authors focus on large consumer firms with big budgets. But Wreden has purposely oriented his book toward the practicalities of business, such as ensuring an effective distribution channel and incorporating the right technologies. At almost 400 pages, FusionBranding is not a quick read, but it is most definitely a worthwhile one for any small business that wants to be a bigger business which means everyone.
This is a must read for business students and entrepreneurs. It is cogent and complete. It emphasizes the customer viewpoint interactions with them. We rated this book four hearts.
-- Bob Spears
Heartland Reviews