Consumer vs. Investor

Does your company, and their management team focus their attention and actions on improving the underlying product/service they offer to consumers, or are they more concerned with increasing shareholder profits, and squeezing costs to improve bottom line?

 

This is an important question to consider, because companies that focus on maximising the consumer experience, will always outperform those that focus on pleasing investors. The answer as to why this is, essentially boils down to long term versus short term thinking by management. Pleasing investors will always result in short term actions, that are destructive to long term value drivers; whereas focusing on pleasing the customer will be highly beneficial in the long run, as the company builds a loyal customer base. 

The best businesses are those that are customer-centric. Customer centric companies focus on offering the greatest value and improving the customer experience. They don’t focus on discounting and gimmicks to artificially improve sales, they believe sales will incrementally increase as consumers have very positive experiences with their products.

When a company is able to build a very loyal and expanding customer base, over time they are going to dominate market share.  

 

Let’s look at a brief ASX example.

JB HIFI- Every time you walk in to JB HIFI, it’s a pleasurable experience. There are always plenty of staff members, who are very helpful and incredibly knowledgeable. I’ve bought every single laptop I’ve owned from JB HIFI; each time I walk in there with no idea of what kind of computer I’ll get, the staff member on hand usually helps me decide. JB Hifi is also easy to navigate, and fun to browse. The long term performance of JB HIFI reflects this customer centric approach they have. 

Contrast this with Harvey Norman.

 

Harvey Norman shops are huge open floor plans, with a handful of disinterested and unhelpful staff. The customer experience at Harvey Norman is frankly rubbish; the share price action over time reflects this.

How can we determine if a business is customer centric, or focused on pleasing shareholders?

Directors report (in Annual report)- check out what the director/CEO is implying in their annual report.... Are they cutting costs and appeasing to shareholders? Or are they reinvesting in the business, to increase the value they offer to shareholders? 

Your own experience- you can judge a business's customer experience easily.... what is your own experience with the business and their product? 

NBSInvesting