Revenue springs from neither products nor sales

Guest speaker refocuses marketing metrics

by Amy M. Avery, Freelance Writer

What gives one U.K. company the confidence to tell Wal-Mart to “Bring it on!”?

What new metric can help you refocus the CFO to realize that the customer, not the balance sheet, is king?

Best selling author, international marketing consultant and energetic speaker Martha Rogers, Ph.D., brought the answers to a recent meeting of the Triangle AMA.  Rogers began her professional career as a copywriter and advertising executive, and earned her Ph.D. at the University of Tennessee as a Bickel fellow. At Peppers & Rogers Group, she has led several large subscription-based research studies focusing on CRM.

She spoke to a sold-out crowd at the March chapter meeting, held at the Duke Fuqua School of Business, where she is an adjunct faculty member.

For Rogers, the “C” of CRM is always a capital letter.  The customer is indeed king, because “there is never a shortage of stuff (to sell); there’s a shortage of paying customers,” she said.

Rogers and business partner, Don Pepper, realized that top executives do not comprehend this fact, which is something the marketing team should understand.

“We asked executives (in a survey) what the primary source of their revenue is,” she said.  “Most answered that it is sales of their product.”

Rogers turns such pat answers on their heads to get us marketing folks to provide the leadership we know we should be offering.

“Customers are the ultimate source of revenue,” she said.  “Customers are more scarce than even products or capital.  That puts marketing at the center of the universe, where we knew we belonged all along,” she joked.

Before the large AMA group could quiet their laughter, Rogers turned some other “known marketing truths” on their heads as well.  For example, she does not advocate that ROI be sole proof of the success of advertising and marketing efforts.  Though the CFO might be hard to convince, Rogers advocates the customer-focused metric of “Return on Customer,” or ROC.

“‘Marketing’ is making sure that we maximize the value of every customer,” she said.  “We need to know and measure how much value we get from each customer, in the short- and long-term.”

That long-term perspective is oftentimes the sticking point.  Both executives in companies and those on Wall St. train us to function as though the day’s-end, quarter-end or year-end number is all that matters.

Rogers detailed how such short-term thinking costs long-term cash:  Why should the local video store clerk, for example, care that you are mad over a disputed $3 late fee?  The computer showed a fee was due, and the clerk can put the paid fee in the cash drawer. The manager’s happy that everything is balanced. But they’ve lost potentially hundreds of dollars in revenue for the year when that mad customer takes her business down the block.

“Wall St. does the same thing,” Rogers said, “when they devalue a stock because of short-term thinking.”

To sum up the program, Rogers presented her three laws:

1. Customers are scarce.

2. Customers are the only source of revenue.

3. Customers create value in the long- and short-term.

With these marketing philosophies, U.K.-based Tesco welcomes Wal-Mart to “bring it on” when the U.S. giant makes its planned forays across the pond.  The U.K. retailer, which is somewhat similar to Wal-Mart, has long been massaging its relationships with all of its customers.  For example, it sends 13 million customized mailers every quarter, generating a 25-30 percent response rate and extra 100 million pounds per year.

“Customers might visit a new Wal-Mart,” Rogers said, “but Tesco knows that its efforts, including mailings with offers based on past purchase patterns, will bring them back.”

Wal-Mart has had its own bad press in the U.S. of late, and Rogers suggests that it should perhaps get its game face on.

“Tesco is coming to the U.S.,” she said.

For more information about our speaker and ROC strategies, visit www.returnoncustomer.com.

[Thanks to AMA member Amy M. Avery for contributing this piece.  Amy is a freelance copywriter specializing in the health, medical and pharmaceutical industries.  She can be reached at z2a@charter.net.]