In the Customer Value Club on June 4th, 2021, the spotlight guest was Timo Helosuo, discussing hard and soft customer data’s impact. Kolster is one of Europe’s leading expert companies specializing in intellectual property rights (IPR) and legal services. Kolster’s customer base is diverse, ranging from international corporations to individual inventors. How should the hard and soft aspects of customer data be measured and understood when customers vary so widely?
Founded in 1874 and family-owned, Kolster has focused on customer value from the very beginning. While tools have increased due to technology, the logic behind customer relationships and valuation has remained the same. CEO Timo Helosuo explains:
Value Creation Can Have Delayed Effects
At Kolster, we believe in long-lasting and profitable customer relationships. Our customer base can include players as large as Coca-Cola Company, and at the other end of the spectrum, individual innovators. The question is how we can serve both profitably, ensuring that our operations are of high quality and efficiency for both parties, and that the customer feels valued, sees the value in our expertise, and is willing to pay for it.
When dealing with the so-called soft data, value creation often has delayed effects, and its evaluation is not straightforward. The journey to obtain the right data is ongoing, and it may never be entirely complete. We have found it useful to approach this through customer segmentation. Segmentation might seem simple, like dividing customers into large corporations, small and medium-sized businesses, and individual entities. However, we segmented based on operational logic from our perspective: Does the company have its own IPR department, individual employees managing IPR matters, or do they seek external assistance?
This determines the potential for conducting business and serving the customer:
– If a company has its own IPR department, they might purchase specific work stages and compare our services with competitors, not only in Finland but also in Europe. These companies often have procurement organizations that handle bidding processes. It’s crucial to offer the customer the right team and often involves volume-based pricing. Part of the customer value comes from integration with the customer’s information systems and processes.
– If a company has employees handling IPR matters, the assignments are broader, involving a strategic path and overall view. This requires a wide range of expertise from our end and understanding the client company’s business. The importance of soft data is emphasized: personal contacts and interactions are essential, and trust must be at a high level. References play a crucial role in building this trust.
– When serving individual entities and startups, coaching and mentoring play a significant role. It’s essential to understand at what stage of growth they are and what actions to take. During my involvement with FiBAN, I’ve encountered companies already on their second funding round, seeking hundreds of thousands in funding – and yet, nobody noticed a basic issue, such as the company’s name being already trademarked globally. All investments in branding essentially went to waste.
Customer Value Impacts Valuation
Calculating customer value typically becomes relevant during company acquisitions. Customer value can impact valuation positively or negatively. While customer value might not be added to the balance sheet, it’s important to understand where the company’s value comes from. For instance, knowing how strong the company’s connection is with its customers is crucial. What’s the likelihood that customers will remain after an acquisition? If customer value is closely tied to personal relationships and employees leave with the acquisition, customers might also disappear.
Calculating customer value might sound complex, but effective calculation methods exist. The whole point of this evaluation is to bring to the management table what the company’s value is and what assumptions and elements it consists of. When you have that data, it leads to better discussions, reduces risks, and allows for conversations on the right topics. It’s not enough to just look at past revenue. It’s essential to understand what kind of customer relationships the company has and which ones are essential to retain for the buyer. Value largely stems from future opportunities. It’s necessary to find out how well your company calculates both hard and soft customer data and how effectively it’s being used for leadership.
The Two-Question Tactic
In the future, calculating customer value will likely increase, and standardized calculation models will become established. The advantage of these models is that they create a shared language within the organization. Customer value is discussed using the same terms and names. This aids in simplifying customer value for everyday needs – that’s the golden nugget. The key isn’t choosing the best theoretical model but rather whether customer value has been properly packaged, creating a common understanding and implementing it throughout the organization.
When discussing customers and value creation, I don’t believe there should be any super-secret information hidden away on a customer manager’s computer. Instead, active information should be available to everyone who works with customers. Understandable and usable data is crucial so that it can be used in daily customer work.
However, at times, it’s necessary to take a step back and view things more broadly to see how we’ve been doing and where we’re heading. Personally, I’ve simplified this evaluation by asking myself two questions:
– If I were to become the CEO of this company now, what things would I improve, and what aspects would I consider satisfactory?
– If I were buying this company, what would make it valuable to me, and what are the risks that need to be taken into account?
Considering these two questions covers all the essential perspectives. You could perform this assessment twice a year, every six months. It doesn’t take much time; it just requires looking at things from a distance. It provides a good sense of where things stand and where progress hasn’t gone as planned. If you don’t consciously conduct evaluations, they usually get buried beneath the daily noise.
