Customer Equity: An Interview with Allison Hartsoe, AI Value Creation Consultant and Author Stephen Shaw 3 weeks ago <span hidden data-amp-original-style="display: inline-block; width: 0px; overflow: hidden; line-heig<P><STRONG>HT:</STRONG> 0;” data-mce-type=”bookmark” class=”mce_SELRES_start”></span><span style=" class="amp-wp-a0319c3"><strong>HT:</strong> 0;” data-mce-type=”bookmark” class=”mce_SELRES_start”></span><span data-amp-original-style="display: inline-block; width: 0px; overflow: hidden; line-heig<P><STRONG>HT:</STRONG> 0;” data-mce-type=”bookmark” class=”mce_SELRES_start”></span></iframe></p> <h3><span style=" class="amp-wp-d496082"><strong> Allison Hartsoe is a leading expert on customer-centricity and the author of “The Age of Customer Equity: Data-driven Strategies to Build a Sustainable Company”.</strong></span> <p>The story is a familiar one, played out year after year, decade after decade.</p> <p>Under pressure by investors to drive up earnings, companies keep spending a disproportionate amount of time and resources trying to acquire new customers. </p> <p>This obsession with short-term growth obliges marketers to focus on the only metric that corporate bosses care about: a bigger market share. Preoccupied by that one measure of success, marketers lose sight of the fact that the surest path to growth is not finding more and more buyers, most of whom are one-and-done purchasers unlikely to buy again, it is getting longtime customers to spend more, more often. Yet repeat customers continue to get treated as an afterthought while the largest share of marketing dollars goes toward buying ads.</p> <p>As long ago as the 1980s a contrary stream of thought began to take shape amongst marketing academics, calling for a shift in focus from driving demand to managing customer relationships. Customers should be regarded as financial assets, they argued, whose value can be counted on to grow over time. To unlock the unrealized potential within the customer base, marketers needed to invest more proactively in developing the relationship, and that meant a more equitable balance between acquisition and retention spending. The health of any business, they declared, could be judged by the aggregate lifetime value of all customers which they called “customer equity”.1</p> <p>By the mid-to-late 1990s, as CRM systems were installed to manage sales and service interactions with customers, and as marketing database technology grew more powerful and sophisticated, the individual value of a customer was suddenly visible to anyone who cared to look. Now marketers could say with certainty: the longer a customer remained a buyer, the more valuable they became. In fact, active retained customers were often found to be worth on average three to five times the cost of acquiring them. Yet over the years the concept of customer equity has never gained much of a foothold on the corporate performance scorecard. It is still viewed to this day as an intangible metric, undeserving of executive attention.</p> <p>One problem, of course, is there is no designated line on the corporate balance sheet for a customer equity calculation. Even the generally accepted idea of brand equity is tucked under the nebulous heading of “goodwill”. The other problem is that customer lifetime value is defined in a few different ways. Sure, there is the version you find in most textbooks, dating back to when catalog marketing was in its heyday, but its operational application using actual transactional detail is all over the place. But what really holds customer equity back as a recognized corporate yardstick is the tricky exercise of coming up with a cost attribution formula that everyone can live with. No one enjoys negotiating with finance, least of all marketing. And if finance isn’t onside, customer equity remains just another bit of marketing jargon.</p> <p>Despite its drawbacks, customer equity can be a vital barometer of company success, according to Allison Hartsoe, whose book “The Age of Customer Equity” spells out how companies can operationalize the concept. Healthy companies have happy customers, she believes, and customer equity is a proxy for the health of the relationship. As a longtime data analytics leader and consultant, she has built a proven AI-powered Customer Equity predictive analytics engine to identify the most promising growth opportunities within the customer base while finding pockets of excess spending. She is a recognized thought leader on customer-centricity and the strategic use of customer data to drive growth.</p> <p>I started by asking Allison what drew her to the rarefied world of customer valuation after earning her degree in journalism.</p> <p><strong> Allison Hartsoe (AH):</strong>: So I’ve always been driven by curiosity. And the journalism degree comes from curiosity and being able to go up and ask anyone any number of questions. And that’s the challenge that most entrepreneurs face, is you’re immensely curious. You see a place in the market, you go after it, and that leads to another question and another question, and you just keep unpacking it. So journalism, and entrepreneurialism, and operating partners, very similar, all three, across the board.</p> <p><strong> Stephen Shaw (SS):</strong>: Well, and I would make the point too that curiosity makes a good marketer as well.</p>
