Customer Relationships over Powerful Brands
I may be talking my own book, but I really believe this article from Harvard Business Review, “Why Strong Customer Relationships Trump Powerful Brands”…
In a sense, what is a brand if it isn’t the sum of all of the trusted relationships with your customers. And those relationships are, in a sense, the sum total of their experience of your brand promise and processes. This particular article used M&A data to analyze the value of brands vs. customer relationships:
“The beauty of M&A for examining valuation trends is that M&As reveal the dollar valuations of all assets at the time of the acquisition. Upon acquiring a business, companies have to value the different assets they acquired for their accounts and balance sheet in accordance with accounting and reporting standards. These valuations include – among other assets – brands (trademarks) and customer relationships.”
The findings are pretty remarkable:
“As the graph bracingly shows, brand valuations declined by nearly half (falling from 18% to 10%) while customer relationship values doubled (climbing from 9% to 18%) over a decade.”
As a result, it seems M&A activity has shifted to focus on acquiring firms with strong customer relationships – and the business opportunity that comes with them. When we look at BP3 and think about brand, we think about the customer experience we’re trying to create for each customer, and for our customers as whole. Not every customer is going to align with our brand promise and out commitments to the whole ecosystem -but the ones that do really benefit from how we do business, one customer at a time.
It’s just nice to see that there’s also an objective, measurable way to arrive at what has always felt like the right answer to us.