A prime piece on the chessboard

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Krish Kumar, the Customer Guru, says, “Let’s examine the question of what a Customer is more carefully: We know he’s indispensable, he needs to be touched. But why do we wish to retain him?”

“Oh,” says Dough, “that’s to get repeat sales.”

“Sure, but what is the Customer, what does he represent to you? If he gets you repeat sales, what is he?”

“Mmm?” mumbles Dough, quizzically.

“Look at it this way. If you have a machine and it makes parts repeatedly, what do you call the machine?”

“An asset.”

Krish starts to smile. “Right, and a Customer is also an asset. Do you treat him as one? You value assets, and here you have an asset that can appreciate if he buys again in the future, and if he gets you sales or orders from others. If the Customer leaves or doesn’t buy from you in the future, the value of the asset is reduced or, in a sense, the asset is depreciated.

“We need to understand this asset and how to treat it. The asset can show on our balance sheet and impact the way an investor looks at us. I suggest you take time to review what we’ve discussed and what you’ve learned when you get back to your office.

“Finally, I said earlier that we need to satisfy and add value to both the shareholder and the Customer. This is a concept we’ll be talking about later when we discuss value and adding value to the Customer.”

Doug returns to his office and pens down what he has learned. A few days later Doug shows Krish what he has written. Krish says that he’s pretty much on target, but thinks it would be helpful to review the key points made earlier.

What is a Customer?

The Customer Guru repeats his definition of a Customer:

“The Customer is indispensable to our business. Without him, we have no business.

“The Customer is an asset that can either appreciate or depreciate, depending on how we touch him. When a Customer leaves, the asset is diminished or is depreciated.

“This asset can be shown on a balance sheet and helps in the valuation of a company.

“This asset is important for the investors and shareholders to view.”

Customers as Assets: Examples