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Viewing Customers As Investments

Every now and then it is worth looking back at how earlier generations thought of marketing. (Or anything else really). There can be a lot to learn — although you often have to cope with some old-fashioned ideas and terminology. An interesting early piece is by Edward C. Bursk which was about viewing customers as investments. The ideas are still relevant. (Although the pronouns are all a bit 1960s).

1966 And All That

1966 was an excellent year. (Okay, it was before I was born but West Ham won the World Cup so it has to be classed as the best year ever. Even better than 1980 when West Ham won the FA Cup, which I do remember. But enough of the soccer references.) In this year, 1966, Edward Bursk noted that investments are key to marketing.

Yet often this kind of investment — expenditures to bring about change in the market that will be to the benefit of the company over time — is intuitive and implicit, rather than carefully reasoned and explicitly calculated.

Bursk, 1966, page 91

In many ways, little has changed since. Too much marketing, though aimed at long-term impact, is treated as a short-term activity by accounting systems. And then the success of the activity is often largely guessed at, or simply imagined, by marketers.

Viewing Customers As Investments

Bursk’s insight is that firms worry about understanding the value of their investments that are intermediate to success. A new machine that will improve the product and through this customer satisfaction. Managers rarely have such a clear view of investments in customers despite customer investments being nearer the end goal of the firm. You can, and should, assess investments in your customers in a similar manner you assess investments in other important assets.

Viewing Customers As Investments

Customers Are Assets

In the years since Bursk was writing progress has been made but less than one might have hoped. I hope we can make further strides towards fully implementing his ideas.

Let me leave with an excellent quote that sums up a lot of the aim of work in this area.

…the fact is that customers do represent assets built up over time; and, from this point on, costs incurred to improve these assets are like capital expenditures — even though, unlike the usual financial and physical assets, they are not carried on the books as such. Moreover once customers are recognized as the investments that they are… there is no reason why attempts cannot be made to quantify the money and effort currently being spent on them.

Bursk, 1966, page 92-93

For more on valuing customers see here, on CLV see here, customer equity see here, and accounting for marketing see here.

Read: Edward C. Bursk (1966) View Your Customer As Investments, Harvard Business Review.

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