Customer asset management maximises the link between satisfied customers and brand loyalty. It helps build a reservoir of customer goodwill, insulating firms against external challenges and market shocks, and helping them achieve superior performance. G Tomas M Hult developed an innovative approach to managing customer assets.

A reservoir of customer goodwill is often a company’s most valuable asset in the long term. It accumulates over time as a result of the company consistently meeting or exceeding expectations and delivering exceptional experiences. “Goodwill” is the collective sentiment of satisfied customers who have developed an affinity for a brand based on their quality products and positive interactions.

The “reservoir” can be portrayed as an intangible repository of trust, loyalty and positive associations that customers have with the company. A high-level or even a full reservoir makes them more likely to continue doing business with the company and to advocate for its brands among their networks.

Through the reservoir of goodwill, companies gain a foundation for long-term performance success based on both a competitive advantage in the marketplace and an insulation against external challenges in their market. Simplistically, the reservoir acts as a buffer during times of crisis or uncertainty such as the Great Recession or the COVID-19 pandemic, as loyal customers are more forgiving and more inclined to give the company the benefit of the doubt. The reservoir of goodwill can also fuel organic revenue growth through positive word-of-mouth and repeat business.

To build up this intangible repository of trust, loyalty and positive associations companies must maximise the relationship between customer satisfaction and retention. Retention reduces risk and can have an exponential effect on profits. Loyal customers are among the most valuable economic assets a company can have.

Retention, profit and risk

As customers continue to engage with a company, the cost of acquiring them is spread out across their lifetime value. When retention increases, the result is higher profit margins as a function of operational efficiencies and the spread of fixed costs across a larger customer base. People often become more loyal and are likely to make more frequent and higher-value purchases when they develop a relationship with a brand or company. This increased lifetime value contributes to higher profits over time.

Optimal customer asset management minimises risk and maximises profit. Retained customers provide a predictable revenue stream. Companies with a durable base of loyal customers are better equipped and have the strategic resources to weather economic downturns, changes in consumer behaviour or shifts in industry dynamics, reducing their overall risk exposure.

Nonstop customer acquisition

Customer asset management is more than retaining customers. It is also about consistently acquiring new ones overtime. Acquisition can begin with individuals showing some form of interest or engagement, such as in social media interactions with the brand. They then hopefully move to purchasing a product or service, thus becoming assets with the potential to generate revenue and contribute to performance over time.

Managing these relationships effectively requires ongoing attention, especially at the initial stages, to maximise their value and foster long-term loyalty. Engagement and interactions must be tailored to the needs and preferences of each individual. Customer asset management involves not only acquiring new customers but also nurturing existing relationships to encourage repeat business, loyalty and advocacy.

Blueprint

The blueprint for customer asset management is built on (1) functions of timeliness and consistency of engagement with the company and its brands, (2) the monetary and nonmonetary assets provided by the customers and (3) the company’s management of the offerings that make up customer experiences and the overall journey.

Figure 1. The blueprint for customer asset management

Customer

To understand the current status of each individual relationship, companies must incorporate timeliness and consistency of engagements into their customer asset management. Understanding the timeliness (recency) and consistency (frequency) of interactions can provide insights into current individual needs, preferences and sentiment toward the company. Sales turnover (timeliness) and people’s expectations of the product/service quality (as a proxy for consistency) can be used as metrics within customer asset management modelling.

Asset

The monetary value of assets is simple (for instance, how much customers pay for a product). The non-monetary value, often not as simple, includes characteristics like brand loyalty, advocacy and feedback.

The value of brand loyalty is clear. It leads to reduced customer acquisition costs, a more stable revenue stream and higher customer lifetime value. As advocates, customers leverage their trust and credibility to influence others. And, while few companies want to have elevated levels of complaints (about 13 per cent of customers complain), feedback is a valuable source of insights into possible quality improvement.

A company’s total revenue (monetary value) and achieved goodwill (nonmonetary value) can be used as metrics in the customer asset management modelling. Goodwill is assessed as the purchase price of the company, if sold, minus the value of assets and liabilities.

Management

Since customers seldom want to be “managed”, a better strategic approach would be for companies to ensure that every interaction is positive, consistent and memorable. In other words, manage not the customers but the offerings at every interaction. This encompasses every touchpoint in the buying and consumption journey, from awareness of a product to after-sale support.

By prioritising management of the interaction, a company can meet or even exceed customer expectations. Perceptions of the quality of value received can be leveraged as a proxy metric for customer experience.

Figure 2. The customer asset management model

Reservoir of customer goodwill

While customers may not actively seek to have their experiences managed, companies recognise the pivotal role of cultivating strong relationships for long-term success. Rather than solely emphasising experience management, companies benefit from a shift towards customer asset management. By prioritising the nurturing of customer assets (maximising the positive link between satisfaction and retention) and consistently at least meeting expectations, companies can foster loyalty, maximise customer lifetime value, and build a resilient foundation for sustainable growth.

That’s why customer asset management (CAM) transcends the notion of mere customer satisfaction, aiming to create lasting value and advocacy. At a minimum, the outcome is loyalty, but the goal is to achieve a constant inflow to the reservoir of customer goodwill. That requires meeting their expectations, delivering high-quality products, providing a high degree of value (positive ratio of quality to price), achieving a satisfied clientele and minimising complaints. If complaints happen, they should be handled at a top-notch level.

By focusing on optimally understanding and fulfilling customers’ wants and needs, a company can cultivate a reservoir of goodwill that fuels organic growth and cements its position as a trusted partner. Companies embracing customer asset management as a strategic imperative will not only thrive in the present but also, to at least some degree, future-proof their success, regardless of technological and infrastructure advances and influx of new competitors in the market.

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• This blog post represents the views of the author(s), not the position of LSE Business Review or the London School of Economics and Political Science.
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