- Who is the core customer of the business?
- Is the customer base concentrated or diversified?
- Is it easy or difficult to convince customers to buy the products or services?
- What is the customer retention rate for the business?
- What are the signs a business is customer oriented?
- What pain does the business alleviate for the customer?
- To what degree is the customer dependent on the products or services from the business?
- If the business disappeared tomorrow, what impact would this have on the customer base?
The second section of the investment checklist, "Customer Perspective", focuses on understanding the customer's viewpoint about a company's products or services. An investor must appreciate how a company is perceived by its customers, as this greatly influences its potential success and profitability.
- Customer Base: Who are the company's customers? It's essential to understand the customer demographics the company serves. Look at factors like age, gender, income levels, and geographic location.
- Customer Satisfaction: Are the customers happy? Customer reviews, testimonials, and satisfaction surveys can be useful resources for gauging customer satisfaction. A company that consistently delivers high customer satisfaction is likely to enjoy customer loyalty and repeat business.
- Customer Retention: Does the company have a high customer retention rate? A high rate may indicate that customers are satisfied with the company's products or services. A low retention rate might signal issues that need deeper exploration.
- Brand Recognition and Reputation: How well is the company's brand recognized? Do customers perceive it positively? A strong brand with a positive reputation can attract new customers and retain existing ones.
- Market Share: What percentage of the potential market has the company captured? A high market share can be an indicator of strong customer acceptance.
- Value Proposition: What differentiates the company's product or service in the eyes of customers? A unique and attractive value proposition can be a significant competitive advantage.
Remember, companies exist to serve their customers. If they're failing in this area, it could be a red flag for investors. Understanding the customer perspective can provide valuable insights into a company's long-term prospects and help you make a more informed investment decision.