Which is a better investment – Customer Experience or Brand Management?

Which is a better investment
The advancement of social media during the last ten years gave rise to the power of social customers. That power precipitated fundamental shifts to the marketing paradigm which was developed over 3 decades prior. Surprisingly, only relatively few companies noted the avalanche of research into the financial implications of these shifts and made appropriate changes, while most still debate the impact of customer experience on enterprise valuations.

I documented before the multiple correlations between successful customer experience investments and creation of wealth. Now, new research published in the Harvard Business Review examines trends of brand and customer value components as percentages of overall enterprise valuation. The authors analyzed over 6,000 M&A (Mergers and Acquisitions) activities worldwide between 2003 and 2013 to reveal the dollar valuations of all assets at the time of the acquisitions. During this period, that coincides with the explosion of social customers influence, the market valuation of “brand” assets declined almost 50% while the valuation of “customer” base increased 100%.

What is better investment

The public transparency of customer experience a company delivers became very common during this period. Consumers and business buyers prefer to use such information to make purchase decisions and that erodes the power of brands.

In the past a brand was recognized by a company as the more valuable asset because they served as a proxy for the quality of products or services sold under that brand. In the vast “ocean” of uncertainties of choice (“Life is like a box of chocolates. You never know what you get”), a brand served as a life raft. The loyalty to a brand reduced uncertainties of the market place.

Today, consumers have unlimited access to better tools for reducing shopping uncertainties – the past experiences of socially connected customers.

Companies that understand this shift in marketing paradigm choose to reduce the investment in trademarks and trade names, banners and domains to focus on delivery of superior customer experience instead.

Delivery of Superior Customer Experience (SCE) means delivery of experience that is rated consistently higher than the experience delivered by your direct competitors from the customers point of view (“outside in” perspective). The only meaningful and authentic rating is done by the customers publically and “in the wild”, i.e. not solicited or influenced by a company or its agents.

Such a shift in marketing investment strategy results in a reduction of customers churn, an increase in margin and a lower cost of customer acquisition, i.e. an increase of CUSTOMER VALUE component of the overall enterprise valuation.

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14 Responses to Which is a better investment – Customer Experience or Brand Management?

  1. Pingback: Tech Writer This Week for July 11, 2015 | TechWhirl

  2. Kathy Lee Pruitt says:

    Great article and very on point!

  3. Gautam Mahajan says:

    Gregory, good thinking. I suppose when you say customer Value you mean the customer lifetime value, as opposed to what the company/product was worth to the customer.
    We find in our customer value studies focused on customers that the image of the company that comprises of the brand and the relationship is often bigger than than the service eserience. Take salt or cement, there is very little customer experience except in the usage and if cement is cement is cement there is no difference in the product. The differentiator is the brand , the trust, the association with the brand
    I am not downplaying customer service. It is very much more important where there is more contact between the company and the customer

  4. Michael Lowenstein says:

    Brands are recognizing that part of management is blurring the lines between brand perception and customer experience; and, increasingly, these two overlap and intersect to the extent that they become the same in the customer’s mind and memory. It’s an update to McLuhan’s classic “the medium is the message”, where there is a sybiotic relationship between the two: http://www.slideshare.net/lowen42/branded-customer-experience-white-paper

  5. GregoryY says:

    Interesting point Michael. What happens if 3 out of 5 products sold under the brand X have positive social reputation, while the rest have a negative one? While companies strive to deliver consistent CX across their product lines, not too many are very successful. I think consumers are more focused on customer experience delivered by specific products they are interested in, not the brands as a whole.

  6. Ram says:

    Effective brand management leads ti superior customer experience

  7. GregoryY says:

    Ram, since this post compares value of brand management to value of LTV of the customers as a percentage of an enterprise valuation, I use the definitions from Investopedia.

    “Effective brand management enables the price of products to go up and builds loyal customers through positive brand associations and images or a strong awareness of the brand. Developing a strategic plan to maintain brand equity or gain brand value requires a comprehensive understanding of the brand, its target market and the company’s overall vision.”

    From that perspective, I think that superior customer experience, delivered consistently over the product lines, is more likely to lead to increase in brand equity. Not the other way around.

  8. Bob Thompson says:

    Michael seems to be saying that brand and experience are one and the same.

    Gregory, you say that CX leads to brand equity. What else — besides CX — leads to brand equity?

    I guess what I’m asking is: What is brand management? The definition is pretty general and doesn’t say what activities are included.

  9. Gregory says:

    This is the best specific list of activities I could find:

    “brand managers serve as the point-person for developing, implementing and executing marketing initiatives and activities for their particular brand. These initiatives and activities include campaigns (print, web, social media, broadcast, etc.), events, corporate responsibility programs and sponsorships.”

    Most brand managers, I had an opportunity to observe, are focused on inside-out broadcasting of their brand’s “messages”. The CEM (CX Management) practitioners are focused, or suppose to focus, on aligning their company processes based on outside-in perspective of how their customers experience doing business with the company.

    “Brand is what your customers say about you, when you are not in the room.” I think the same could be said about a reputation. In social customer’ markets, screaming about your virtues does not improve your reputation – “what you do speak so loud, I can’t hear what you say”.

  10. agnesjosef says:

    Nice explore!Customer experience is the more prioritised one compare to brand management. If they get satisfied with our services/products, they will do better branding instead of us.

  11. Rudy Vidal says:

    Operationally, investment in a brand management is understood by most people as a collection of activities that promote and protect trade names, images and public of a company’s brand. The result is (hopefully) a public perception of value delivered by the company, that differentiate it from its competitors by reducing uncertainty in the minds of consumers. Positive customer experience, delivered consistently over period of time and shared by customers with a public, assures prospective buyers in a likely positive outcome of their choice. So from that perspective I agree that both – brand management investment and customer experience management investment – looking for the same result. However, that is where the similarity ends, IMHO.

    Brand management investment is trying to “buy” affinity of the customers, where CX management working on “earning” it. That is an idea, but of course anything can be diluted and corrupted.

  12. GregoryY says:

    Operationally, investment in a brand management is understood by most people as a collection of activities that promote and protect trade names, images and public of a company’s brand. The result is (hopefully) a public perception of value delivered by the company, that differentiate it from its competitors by reducing uncertainty in the minds of consumers. Positive customer experience, delivered consistently over period of time and shared by customers with a public, assures prospective buyers in a likely positive outcome of their choice. So from that perspective I agree that both – brand management investment and customer experience management investment – looking for the same result. However, that is where the similarity ends, IMHO.

    Brand management investment is trying to “buy” affinity of the customers, where CX management working on “earning” it. That is an idea, but of course anything can be diluted and corrupted.

  13. Rudy Vidal says:

    Gregory, as always a great post. I think the question in your title is a trick question 🙂 For me, the answer is “they are one and the same.” The customer experience is important, but of limited and short lived benefit, if it does not provide authenticity to the brand. Ultimately, the differentiation of the brand, is no longer the experience of the customer (I know what sounds ridiculous coming from a guy like me.) Instead, the differentiation is now how the customer adopts the brand as a “persona” with a personal intention, showing to be committed to its achievement. What matters is: 1. Does the brand align with the customer values. 2. Is the brand authentic to its values and therefore authentic to those of teh customer. 3. Does the customer see the brand as authentic when comparing, that it says vs. what it does. So, based on this, what is more important? Customer Experience or Brand Management. I would say, Clarification of Brand purpose, promise, posture is as equally important, as the customer’s experience of the brand as authentic to that purpose, promise and posture. As always, I appreciate your well thought out posts.

  14. Joe says:

    This may be an old post, but I came upon it. From my perspective, it is important to separate the “Brand” from the product. The Brand is the promise that a customer buys. It is more than the functional expression of the offer. The product (or offer/service) is what they buy.

    An exceptional customer experience is part of that brand (think Apple), where every interaction with that brand has been designed to consistent and singular, and support what that brand stands for. For Apple, that reaches to the product level: They stopped selling the iPhone 5c; that product, and the experience while using that product, did not support the brand (and vice versa). any organizations that find itself with products that does not live us to the brand promise has clear path in front of it: end those product lines. The Brand should provide a guiding light for the experiences and organisation delivers to its customers. As such, investments in CX, are investments in the Brand

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