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Customer satisfaction - the extraordinary and deciding factor
Monday 22 February 2016
When it comes to determine the value and prospects of a company, many roads lead to Rome. But most investors and analysts overlook one component: Customer satisfaction. This is a serious mistake.
You can rephrase this or call it what you want. In business, in the end there is ultimately only one criterium for success, which is customer satisfaction.
Entrepreneurs or managers calculate price increases, put pressure on suppliers to meet their conditions and employ costly consultants, while also hiring new
people or add entire departments to achieve their objectives and hold meetings to achieve this. All this effort is in the long run in vain if the customer satisfaction is not guaranteed.
Customer satisfaction is the foundation, and basis of all business. Without customer satisfaction no company will remain in business - no matter how big it is.
We therefore always begin our research as value investors with three basic questions:
- does the company manufacture a useful produce which is in demand or, does the company offer a service which meets a real market need?
- the next step is to investigate if the product or service enjoys a good reputation with customers. Then we look at the competitive situation.
- Are customers really satisfied, is the company firmly established among customers, only then do we start by analysing the balance sheet and income statement.
And here is where the pieces of the puzzle come together. You can clearly see if the company is well managed to earn enough to spend on research and development, marketing, promoting human resources and to expand. Or if customer satisfaction is “purchased”, with profit margins which are too low. Is the company just cruising along? We stay away from companies which do not have the ability to manage their pricing.
We attach great importance In our value funds "ME Fund - Special Value" to these steps and invest a lot of time when it comes to checking the quality of the company. Personal on-site discussions with companies, visiting trade fairs, contacting competitors and talking with former employees are some of the measures that will bring you closer to answer the question: Does this corporation have a fundamental right to exist on the basis of "customer satisfaction" or is it a case of "going down with the Titanic."