Brand Momentum
Peppers and Rogers in their book “Return on Customer: Creating Maximum Value from your Scarcest Resource” brought to the forefront a number of the key vexing issues/problems faced in boardrooms and cubicles around the world.
“Company managers are expected to strive for long-term value and growth in order to increase true share holder value, even while they are also pressured to deliver against more and more aggressive short-term goals.” (pg 3.)
“The problem is that the more short-term a company’s focus becomes, the more likely the firm will be to engage in behavior that actually destroys long-term value." (pg 4)
To remedy this they put forward a new metric - Return on Customer
ROC = Period 1 [Cash flow + change in customer equity]/customer equity at period t-1
The metric and its underlying assumptions attempts to help enterprises understand their customers in a new light – viewed not only for their current period purchases but also for the increases or decreases in value to the enterprises over the longer term.
Customer trust, determining customer needs, treating different customers differently, and determining a customer’s potential value are some of the key platforms they see as driving LTV calculations. They propose that leading indicators (lifestyle changes, behavioral cues and customer attitudes) can be used to help predict future changes.
Despite the guidelines and case studies, the metric has been criticized in some quarters for not having enough of a prescriptive foundation to help enterprises chart a future course.
However if we approach the problem from a different perspective and invoke the notion of momentum we might yield a more practical solution. Using the same variables as Newton’s formula where:
Mass = NPV of the financial stream generated by its brand’s customers
Direction = the noteworthy positive and negative experiences along the brand experience chain that customers are having with the brand which will impact (enhance or detract) on their share of wallet expenditures with the brand
Velocity = the degree of brand engagement – as measured by depth/frequency of purchase and size of shopping basket
With these few simple measures – I believe it is possible to measure a brand’s momentum and with it begin to understand the tradeoffs between different courses of action to begin charting that future course.
For those interested, more detail on these ideas are at http://miroslodki.wordpress.com
