I’m still amazed at how often I hear about a new brand measure that will make our lives easy. Each time, the measure is the only thing, or at least the main thing, we must monitor in order to track the health of our brands. These incidents remind me of a client assignment I once had to rank order my top ten measures of brand health for one of the world’s top 100 brands (according to Interbrand at the time). I came up with twenty measures, among them my top ten. Even so, these measures were specific to consumer packaged goods brands (CPG) and I’ve since developed similar recommendations for other categories where CPG measures do not all translate well to the unique dynamics of e-business, travel or consumer services.
As for the single most important measure, well, I agree that there is one measure of brand health and it is a derivative of “sales” – the only measure of brand health for many years! I believe that the one measure most critical to brand health is the net present value (NPV) of expected Customer Income Flows (CIF). This is the basis for underwriting the value of a brand – just as one underwrites the value of a business as an investor. About the only time anyone uses this measure, though, is when buying or selling a brand. Even then, the measures are usually created and negotiated by financial professionals rather than marketers.
Cliquity's Captivation Coefficient (CC)
To be fair, there have been some extremely helpful measures of brand health introduced in recent years like Fred Reichheld’s Net Promoter Score (NPS – http://www.netpromoter.com) and most recently, Razorfish’s Social Influence Marketing (SIM) Score (http://fluent.razorfish.com). NPS is a measure that lends itself to both aggregate and individual calibration, while a SIM Score, as Razorfish defines it, is derived in aggregate. Even so, I believe there are ways to adapt SIM Score to measures of individual customers. I recently worked on one such measure – Captivation Coefficient (CC) – for ClickSquared’s Cliquity framework and model for measuring, monitoring and maximizing marketing success. Cliquity’s CC monitors an individual customer’s brand sentiment (positive or negative change) and then uses these measures to aggregate, or roll up, measures for segments or the entire brand as one sees fit. This approach enables the marketer to combine the sentiment measure (CC) with the customer value measure for powerful insight to how to manage specific customer relationships as investments when they ebb and flow with each brand engagement. [Full disclosure: I'm a founder and shareholder of ClickSquared.]
Even though I’m partial to Cliquity and its Captivation Coefficient, I’ve used NPS, the “ultimate question,” many times in order to have a simple means of measuring (and benchmarking versus other brands) brand health based on how likely customers are to refer my clients’ brands. At the same time, however, I’ve always recommended asking a second question to accompany the NPS question – namely one that gets at relative customer value, or CIF at the individual customer level. In short, a second measure that tells us how much of the product category in question the customer buys. How much the customer flies, buys, eats, drinks or spends. These two measures enable us to understand how our most important (valuable) customers feel about the brand and how those feelings translate to brand health in terms of monetary value. If the 20% of folks that account for 80% of our brand’s income would wholeheartedly recommend us while over half of our “customers” would not, do we have a problem? Is it getting better or worse? And most important, what does it tell us about the NPV of our expected Customer Income Flows?
The NPV of expected Customer Income Flows (CIF) is a tough measure to gauge since it’s “expected” over a future period and not guaranteed. And, of course, it is surely debatable just as enterprise value is when negotiating the sale of a business. Nonetheless, marketers need to strive to measure and consistently monitor this figure. It is not terribly difficult to track this measure at any point in time (current period CIF – how much a customer spent this month for example), yet quite difficult to forecast the expected value of CIF. When used in tandem with other measures like NPS, Cliquity’s CC, or even an adaptation of SIM at the individual customer level, CIF enables the marketer to create a holistic diagnosis of brand health along with prescriptive marketing actions to improve it through thoughtful investments in specific customers.
One measure? Yes – NPV of Expected Customer Income Flows (CIF). Even so, without other measures of brand health even the best marketing doctor can’t prescribe a course of action to improve the brand.