eBusiness Weekly
Clemence Mutembo
I am a serious fan of financial accounting, I like its rationale. You already know that owners’ equity is that which remains when you subtract all your liabilities from your assets and it has a number of accounts.
Customer experience can have a direct impact on a company’s financial profile in several ways. First, a positive customer experience can lead to increased sales and revenues. Happy customers are more likely to purchase products or services and may even become repeat customers.
In addition, a positive customer experience can reduce costs by reducing customer churn and the need for customer service or warranty support.
Finally, a positive customer experience can boost a company’s reputation making it more attractive to investors and partners.
In short, a positive customer experience can have a direct and positive impact on owners’ equity.
Customer experience can have a direct impact on owners’ equity which is the value of the company’s assets minus its liabilities.
A positive customer experience can increase the value of a company’s reputation and customer loyalty.
This in turn can also increase the owners’ equity.
Conversely, a negative customer experience can lead to a decrease in the value of a company’s assets which can have a negative impact on its owners’ equity.
In short, owners’ equity is directly connected to the overall customer experience.
There are several different types of accounts that fall under the category of owners’ equity. The most common include retained earnings and share capital.
You already know that retained earnings are the profits that the company has earned over time and that have not been distributed to shareholders in the form of dividends.
You also know that gains or losses from foreign currency translations are considered a type of owners’ equity. This is because they are recorded in the owners’ equity section of the balance sheet.
Everyone knows that foreign currency translation gains or losses are the result of changes in the value of the company’s assets or liabilities due to fluctuations in exchange rates.
These gains or losses can have a significant impact on the company’s overall financial position.
For example, if the value of the company’s foreign assets increases due to a strengthening of the foreign currency, the company will record a gain on the translation.
Who doesn’t know that mark-to-market reserves are also considered a type of owners’ equity?
Mark-to-market is a method of accounting that requires the company to adjust the value of its assets or liabilities to reflect their current market value.
For example, if a company has a long-term investment in a security that has increased in value since the original purchase, the company would record a mark-to-market gain and increase its owners’ equity.
Conversely, if the value of the security has decreased, the company would record a mark-to-market loss and decrease its owner’s equity.
A company’s reputation is also connected to owners’ equity. Reputation is an enduring set of impressions and evaluations accumulated in the long-term memory of consumers and stakeholders of a company.
There are many reasons why a business should protect its reputation. Firstly, a good reputation can attract new customers while a bad reputation can drive customers away.
In addition, a positive reputation can help to increase sales and profits while a negative reputation can lead to a loss of revenue.
Furthermore, a good reputation can help to build trust and loyalty among customers, while a bad reputation can damage a business’ credibility and image.
Ultimately, protecting a business’ reputation is important for its long-term success.
If a business does not protect its reputation, it can suffer a number of consequences. For example, it may see a decline in sales and profits as customers choose to do business with competitors that have a better reputation.
In addition, it may become more difficult to attract and retain top talent as potential employees may be turned off by the negative image of the company.
Furthermore, a poor reputation can lead to a loss of investment and funding as investors may be reluctant to put their money into a business with a bad track record.
In the worst-case scenario, a business with a damaged reputation may even be forced to close its doors.
Let’s say you enter a restaurant with the intention of buying food; when you pay, you expect your food to be delivered to you in time.
It can happen that they may run out of the gas they were using to prepare or cook the food. In some instances, businesses with good customer care normally tell you that your food will require such and such time to be ready.
In the worst cases, they just keep quiet and you are left guessing about what could be happening. You may end up waiting for over 40 minutes for the food as they try to buy the gas!
Our point is that customers may end up getting frustrated when they wait for too long to receive the promised value.
It’s very common for services to be disrupted by a number of value chain and supply chain issues. Value chains and supply chains are so connected to service delivery and customer satisfaction.
In all this, it is a good business practice to give customers updates on what is happening. If you keep customers in the dark, they inevitably get frustrated and feel like they wouldn’t want to come back again to buy from you.
This has the effect of lessening your revenues or sales and consequently your profitability. In my experience, no customer wants to be kept waiting for too long to receive the product or service.
Some customers will not complain when they get bad service, they will simply not buy from you next time. Excellent customer service should form the basis for future engagements with the customers.
In the field of marketing, there are some metrics used to find out the degree to which customers are satisfied with a company’s products or services.
The two most common ones are: Net Promoter Score and the Customer Satisfaction Index.
The Net Promoter Score is a metric that tries to see to what extent the customer could recommend others to buy from that business.
So on a scale of 0-10, customers are asked to what extent they could recommend a business’ products and services. The responses that are gathered will fall in three categories.
From 0-6: detractors
From 7-8: passives
From 9-10: promoters
What are called detractors are people that will dissuade and discourage people from that business or its products. Then passives (or neutrals) are people that will neither discourage nor promote a business.
Then promoters are people that will readily recommend a business and its products to friends and relatives.
To get the Net Promoter Score, a business will simply subtract the percentage of detractors from promoters. For example: Promoters 60 percent-20 percent detractors. The NPS for this business would be 40.
The weakness with this metric is that it doesn’t tell you the major drivers of customer satisfaction since it is a composite metric gotten by asking the customers just one question; “to what extent would you recommend our business on a scale of 0-10?”
We shall explain the customer satisfaction index in future articles but essentially it looks at satisfaction from various competitive attributes like responsiveness, customisation, friendliness, dependability and Thankfulness.
A business that does not invest in customer experience is automatically setting itself up for poor customer experience!
Customer experience is how the customer feels as he or she deals with any part of your brand.
There are variations in terms of how the customer feels across different brand touch points. It’s important for any business person to realise that customer experience is an outcome and by-product of varied investments by the business.
Some expenses are revenue expenses while some are capital expenditures. You already know that a capital expense is capitalised, meaning it is recorded in the company’s balance sheet and the cost is spread over the useful life of that asset.
The people working in a business are a key brand touch point. To improve the people, the business ought to get them trained frequently by a special trainer.
Staff trainings are just one of the many ways through which a business could improve the resultant interface between the customers and the business.
Trainings if done well have the positive effect of sharpening organisational effectiveness through the way in which they improve the people’s awareness and competences.
I would recommend a staff training frequency of once in every three months.
Untrained people severely damage the business’ reputation, brand and profitability through ignorance.
Doing business and yet not fully understand the needs, requirements and characteristics of the target market is a sure recipe to wastage of marketing and business resources.
Markets differ and it’s important for anyone serious about business to know that there are differences in markets, differences that warrant attention from the marketers.
Ignoring these differences could mean you deploy a wrong marketing mix to those people! You already know that a wrong marketing mix spells disaster to products, businesses and organisations.
Marketing mix is a fluid concept that should be fully understood by anyone seeking to make a meaningful impact in the world of commerce.
Markets are supposed to be broken down into distinct, smaller and homogeneous groupings that have similar characteristics. There are a number of bases for segmentation of markets. The most common ones are: geographic, demographic, psychographic and behavioural.
When you know the characteristics of a certain type of people, you are surely better placed to configure and deliver value that matches the specific requirements of those people.
Certain products have to be presented in a certain way if they are to appeal to certain markets. I have seen someone selling fresh meat from a dirty bag in the streets of Harare! Some people will not buy that type of meat though you may have some people buying it.
Clemence Mutembo
Clemence Mutembo is a high-impact sales & customer experience trainer who has done over 400 presentations to small ,medium and large enterprises. You may reach him on :0778 994 994.
