It's no stretch to say that customer engagement provides a
sharper and more relevant picture of brand health than do any
number of other measures that companies and analysts typically rely
on. Engagement reveals the extent to which a company has created
strong -- and valuable -- brand marriages and it provides a
sensitive monitor of the ebb and flow of the company's brand
relationships.
That's not how most companies gauge their business success. In
part, it's because they've had no credible metrics that could
reliably reflect their relationship-building success. But it's also
because that's not what Wall Street looks at. As a result,
engagement hasn't been relied upon as one of the key factors that
drive a company's stock value, even though it's abundantly clear
that a company's customers ultimately determine the
company's worth.
Wall Street, however, tends to value sales, market share, and
volume growth. For an automaker, it's growth in the numbers of
vehicles it sells and in the total profits it makes. For a soap
maker, it's growth in market share and total profits. For
retailers, it's total sales volume growth -- but with special
attention to same-store "comp" sales growth, or the volume
increases seen in stores that have been open for at least a
year.
Growth is the focus, even though research shows that bigger is
not always better. Richard Miniter's The Myth of Market
Share analyzes whether market share is an indicator of brand
health, and concludes that it isn't. Miniter cites one study of
3,000 companies, which found that "more than 70% of the time, the
firm with the biggest share of the market doesn't have the highest
rate of return." The focus, Miniter contends -- and we agree --
should be on the customer, not on the competition.
That's a significant problem. Whatever a company identifies as a
key goal will obviously become a critical objective that guides
every company manager's plans and programs. For a good many of
them, the goal will become an obsession and the cause of their
sleepless nights.
So if the identified key goal is volume and share growth,
managers will look to programs that will quickly and efficiently
help to achieve them. Price-cutting is certainly one way;
management can implement price reductions, deep discounts, and 0%
financing. Products will move, at least in the short term, but
at what cost?
If the key goal is company profits, then managers can pursue
another direction, cutting the costs of doing business so these
expenses can instead go directly to boost the bottom line. Profits
will increase, at least in the short term, but at what
cost?
Neither increased volume nor increased profits will necessarily
benefit the real owner of the brand: the customer. And if there's
no benefit to the customer, the company not only fails to enhance
the brand marriage, it weakens it. When customer engagement slides,
so do a great many other outcomes, including future sales, growth,
and profit.
Instead, companies should focus on an objective that merits the
diligent, even obsessive attention of the company's managers:
customer engagement, and healthy brand marriages. Every manager
should be laser-focused on building and protecting the company's
most precious assets -- its powerful and passionate customer
relationships. These brand relationship assets determine the
continued health and future success of the company.