BUILDING BRAND EQUITY: HOW MUCH IS CLEAN DATA WORTH TO YOU?

BUILDING BRAND EQUITY: HOW MUCH IS CLEAN DATA WORTH TO YOU?

By Marilyn Stewart & Geoffrey Bailey

One of the most powerful, and frequently overlooked, aspects of customer data is the impact it has on a company’s value. Data and its successful management are, potentially, the highest generators of worth and the most valuable assets that a company can build.

Research by McKinsey found that data driven companies report above-market growth and an EBITDA (earnings before interest, taxes, depreciation and amortization) increase of up to 25%. Companies that embrace data-driven growth strategies are among the most valuable in the world, both in terms of market capitalization and innovation.

Data is an asset not a cost
Customer relationship management (CRM) and the data supporting it can be misused and misunderstood and misinterpreted. It’s an asset, not a cost. Data – especially that supporting loyalty programs – has astonishing value.

As the findings of a Customer Loyalty Engagement Index published by Brand Keys prove:

• A loyalty boost of just 7% can elevate lifetime profits per customer by as much as 85%, and a loyalty increase of 3% has been shown to correlate to a 10% cost reduction.
• Building loyalty with 5% more customers has been shown to lead to an increased average profit per customer of between 25% and 100%.
• Acquiring a new customer is estimated at anywhere from 5 to 25 times more expensive than retaining existing ones.

The jaw-dropping value of data
The Pareto Principle, when applied to consumer marketing, states that 20% of repeat customers are responsible for 80% of the sales. This is true for most businesses.
Even a slight increase in the percentage of repeat customers will lead to an exponential growth in revenues. As proof, Forbes – the U.S. based business platform – reported that:

“Recently, with their businesses stricken by the Covid-19 pandemic, both United Airlines and American Airlines have secured multi-billion-dollar loans by collateralizing their MileagePlus and AAdvantage customer loyalty programs, respectively.

The third-party appraisals of their data suggest that it is worth two to three times more than the market value of the companies themselves. United’s customer data was valued at $20 billion while its market cap at the time was about $9 billion.

Similarly, American’s data was valued at a minimum of $19.5 billion and up to a jaw-dropping $31.5 billion, whereas its own market cap was hovering at less than $8 billion.”

Conclusion: The high valuations of data-rich companies:

• Accountants are pragmatists. Investors are opportunists
• That’s why data-rich businesses enjoy such high valuations
• Microsoft’s $26 billion acquisition of LinkedIn wasn’t for its 1990’s-style web app or the hardware that hosts it
• Nor was Facebook’s nearly $22 billion acquisition of WhatsApp
• Both transactions were driven by the desire for data: top quality, actionable customer data – including transactions, interactions and profiles
• That data can and should be owned and controlled, measured and managed

As the saying goes: You can’t manage what you don’t measure. Accordingly, you can’t monetize what you don’t manage.

Marilyn Stewart & Geoffrey Bailey are co-founders of The Loyalty Metric: Understanding the art and science of attraction.