Customer Value: A Competitive Advantage for Private Companies

Aug 09, 2004

By John Hennessy

“Private companies have the opportunity to create the best of all worlds when it comes to customer experience, measurement and equity. In terms of creating and executing programs to grow customers, they are unbridled by thousands of shareholders and analyst judgments. They can play for long-term success and see short-term profits as well as any public companies. And in terms of capital markets, we think the best capital market is the one you grow yourself. Organic growth comes from customers, which are the best asset and only asset a private company has.”

The above is the closing paragraph of an article by Don Peppers and Martha Rogers Ph.D., in the July/August 2004 issue of 1to1 Magazine. Peppers and Rogers build to this conclusion citing several companies as examples.

Cargill, is one private company that has been able to create a superior customer experience, largely, reason the authors, because of a culture of service established by the company’s founder and adhered to through subsequent management successors.

The company’s place in the market is a direct reflection of its adherence to the principles established in 1865 by its founder W.W. Cargill, and carried on today in its mission statement: “Solutions start with in-depth understanding of customers. They are created by employees who are trustworthy, creative and enterprising – hallmarks of the Cargill culture and character. Our brand is our promise: Cargill is the company you want to work with to get distinctive value.”

High-end speaker company Bose is another private company. Bose gains a competitive advantage through an unwavering commitment to reinvesting in its own business. The company plows 100 percent of its profits back into its business.

While private organizations generally have an advantage over publicly traded businesses – because they are not subject to the demands of stakeholders with agendas other than creating long-term value for a company – some, such as Costco, buck the trend. But, as the authors point out, the warehouse club giant has been devalued by some analysts for trying too hard to please customers and employees.

Moderator’s Comment: Are public companies really at
a disadvantage when it comes to implementing loyalty programs and other customer-centric
business initiatives?

This article speaks to fundamental differences in measurement
and rewards. If your company is measured and rewarded for satisfying shareholders,
the initiatives you choose and what you track as success metrics will be very
different than if your company is measured on and rewarded for satisfying your

Costco is an interesting example. They are clearly focused
on customers and employees, yet the financial markets are saying that they want
Costco’s focus to be elsewhere. It has to be frustrating to do what you know
is right and yet fail to realize the full benefits of your efforts.

If Costco were to abandon or even water down its current
practices, it would be a case of being careful what you wish for, because it
might come true.

John Hennessy – Moderator

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