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ROCE : Return On Customer Experience

Last month I was invited to speak at the customer service conference of a well-known MNC bank. What did a left brain valuation type like me have to do with Customer Service? I'm the closest thing to a bean counter that the marketing world can get.

So what in the world does brand valuation and customer service has in common?

Plenty actually. Here's the thing: most companies treat customer service as an expense (to be closely monitored), not an investment for a return. So the two key metrics for customer service management in many companies is the number of service calls that are completed and the cost per call. Fewer calls and shorter calls is better than more and longer calls.

From a cost management perspective both make perfect sense. But here’s the issue: managing it as a cost actually kills businesses but very slowly. Three months ago, India's leading telecom company told me ( a high value customer by Indian ARPU standards) that they could fix the connectivity problem on my phone only if there were enough subscribers on their network in our office!!! No marks for guessing what happens next.

So why should I treat it as an investment?

There are three essential pillars for demand generation: Consideration, repeat purchase and advocacy. There's isn't a fourth. There is enough evidence available now of a direct correlation between advocacy and business risk.( Read the book called Net Promoter Score). A very high percentage of the Apple business is made up of repeat purchase and references from the fervent faithful. And their evangelization.

Both of these metrics have a direct bearing on demand risk and customer acquisition cost (and very often even liquidity). One protects the bottom line and the other enhances it. Outside of "club" industries like energy, and mining, most intrinsically valuable businesses will enjoy very high repeat purchase and advocacy.

Now guess where repeat purchase and advocacy are generated. No marks for guessing. You got it...in the heart of a well-treated customer. Not necessarily always a satisfied one but one with an enduring memory of being treated well. Singapore Airlines has an articulate philosophy on this. "We don't strive for perfect service. We manage our imperfections better than most"

So most valuable businesses are not necessarily the best recognized businesses, but the most reputed ones.

What's the difference? One has very high visibility. The other enjoys very high regard. And regard cannot be bought. You need to earn it. From your customer. It may not be polite to make comparisons here, but I'm certain you don't need my help to think of some good examples of both.

Which one would you put your money into?