Copyright 2002, D. Wendal Attig All Right Reserved. Contact his offices for permission to publish in magazines or excerpt.

It's an age old question, "WE know that our brand has value and WE suspect it impacts the bottom-line, but how can WE connect the investment in our branding initiatives to the company's bottom-line?"

Before I share this answer with you, let me issue a bit of a warning: The answer may seem too easy given the fact that even the advertising and marketing industries have--until now-- been at odds on brand equity measurement. But as the coach, let me suggest that you keep an open mind and let the answer work for you.

Every time we talk about branding, we must talk about human behavior; We take action designed to trigger the appropriate response from the end-user. The costs of taking these actions are associated with three major areas of our business--regardless of what business we are in:

1) Customer Acquisition --our desire to attract new customers

2) Customer Retention -- our interests in continuing to do business with customers we have already acquired.

3) Life Value of the Customer --how much revenue that customer represents over their lifetime of loyalty to our company

Let's go straight to the numbers:

While this varies from company to company, it is generally held that the costs of acquiring new customers can be as much as 5-12 times more than it costs to maintain current customer relations and build on-going customer loyalty. Let's say it costs your company $500 a year to service an existing--on-going relationship with a loyal customer. These costs include communications, promotions, actual customer service response.

Using 10.0 as our multiplier for the acquisition of new customers. By the time you calculate the promotional time, effort, money spent over time to compete for new customers, it could cost you as much as $5,000 to attract a new customer-- a $4500 difference.

Let's look at your overall customer base. What is the attrition rate--how many customers do you have to acquire/replace every year to keep the volume in your business at profitable levels? 20%?

Customer Loyalty then becomes a central issue to the value of the brand. If every loyal customer represents a huge saving over new customer acquisition, is there additional value?

Yes, if we look at the life value of a customer. Sam Walton is quoted as telling his Wal-Mart employees that a one-time customer might spend $20, but a loyal customer is worth an average of $2000 per year for life! Looking at the average demo of shoppers in a Wal-Mart near you quickly portrays a life value of $50,000 or more, easily. In your own business there are appropriate parallels.

Take the differences between customer acquisition and retention costs, factor in the attrition rate, and you'll quickly see why becoming the brand of choice is critical to the immediate profitability of your company. Then calculate the life-value of a loyal customer against a one-time customer, and the long-term results versus the branding investment begins to emerge.

While any business certainly acquires hard assets over time that have a monetary value, ultimately the true value of your business reverts to customer behavior--the likelihood that a certain number of customers will behave in the future as they have in the past.

Loyal customers are the product of branding. Branding in the true spirit of the term, is creating a connection--bridging the gap-- between what you offer and something your most profitable target market values. When you complete this connection, you will build loyalty, retain a larger percentage of your customers and enjoy the life value profitability that results in greater ROI.

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Executive Exercise:
To capture new brand impact thinking in your organization, answer these questions:

• Do you know how much it costs your company to acquire a new customer?
  
  
• How much does your company spend on customer loyalty/retention management per customer per year?
  
  
• Do you know the life value of an average customer to your business?
  
  
• Are you telling your existing customers and your anticipated customers how your company delivers what they consider to be valuable?
  
  
• Is your company name synonymous with this "value"?
  
  
• What do you believe it would take to become the preferred provider in your business category?

These questions are designed to stimulate thought. It would be unusual to have the answers immediately, but if you find a continued lack of consensus, don't panic. Professional help in the form of executive brand coaching is available! Just call our offices and give us an opportunity to show you how to jump-start your branding initiatives.

727 / 468-9440
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