Rodolfo’s Pizza – Under New Management

Posted on 09. Jun, 2013 by in Customer Relationships, Marketing Strategy, Word of Mouth

I’m always intrigued when I read such banners posted in the windows of businesses…  When a business changes hands, one would generally expect the new owner(s) to have invested in the business because of the business’s profitable performance and its assets.  One very compelling asset of an ongoing business is its following of loyal customers (i.e. a ‘devoted’ customerbase).

What Qualifies as a Business Asset?

[Allow me a quick aside.]  Unfortunately, in sales of American businesses, a loyal customerbase is not specifically identified as a business asset.  Instead, the value of loyal customers is often collapsed into the accounting category “goodwill”.  While this may be a useful construct for the accountants (providing a “catchall” for any items justifying a sales price exceeding the market value of all tangibles), it is a terribly disregardful term from a marketing perspective.  It’s really time for modern American accounting practices to catch up with other countries in recognizing a database of devoted customers as a real business asset.

Think Strategically

Putting aside the recognition of the customerbase, if one purchases the assets of an ongoing business including its “goodwill” (the allied customer relationships) why proclaim to the market that “we’ve changed who we are” with the ‘Under New Management’ banner?  Undoubtedly there’s some of the new owner’s ego driving such an announcement.  But the proclamation seems to contradict the primary motivation for buying the business in the first place: to capitalize on the current profitable relationships with customers.  Why not a stealthy transition?  “We’re the same as we always were…only some faces have changed!”

The single justification for announcing we’re “Under New Management,” is the situation wherein the new owner has invested in a failing business…  In this case five or more degrees of separation are not only desirable, they may be necessary.  But why then keep the former business’s name?  Why not reinvent the business with a new name and positioning?  Retaining the trappings of a failing business is like buying a haunted house…the new owner will be plagued by the specters of poor customer relationships and faulty products and services (of the previous ownership) over and over…  The only logical solution; an ‘exorcism’ – a sign proclaiming we’ve thrown the rascals out and are now “Under New Management”.

Make a Strategic Assessment

So, my ‘sagely advice’ to those thinking about acquiring an existing business is a thoughtful assessment of the current customerbase: How many profitable customer-relationships are included? How strong are the bonds? How much opportunity is there to grow the business in the future?  For opportunities passing this vetting, the loyalty of the current customerbase is ready for exploitation.  Then, when the business is acquired, the new owners can leverage the loyalty of the current customers by building on their affiliation with the enterprise and encouraging their positive word of mouth to win more customers over in the future.  In this case, the posted sign should read, “Operating Under a More Enlightened Customer Relationship Philosophy”.

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