Investment checklist - Customer perspective

Investment checklist - Customer perspective

  • 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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. Market Share: What percentage of the potential market has the company captured? A high market share can be an indicator of strong customer acceptance.
  6. 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.

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