The Goodwill Hunters

My former colleague Karl Long puts it succinctly: “the very heart of strategy rests on the value creation question, who does it, why, by what means, and how do we do it better and cheaper than the other guy”. One way to create value, he proposes, is to create and lead a community. Communities add real but intangible value via the connections that they provide (hat tip to Scott)

Social communications tools provide the ability and opportunity to deliver actual, albeit intangible, value e.g. perception, reputation and trust, emotional attachments, and, perhaps most importantly, customer satisfaction.

In accounting terms, when one company acquires another, the excess paid above and beyond the tangible assets is called the Goodwill. Goodwill is made up of many things, including: perception, reputation and trust, emotional attachments and…

Goodwill is an asset that is worth building.

Chris Brogan was at the #likeminds summit I was lucky enough to attend last week, and he mentioned Milton Friedman’s point that businesses primarily exist to return value to shareholders. Although people are free to question this, it reminded me that a company’s valuation is not merely about this quarter’s profits, but is instead dependent on its ability to generate future profits. Today’s sales keep a company afloat,  but business value is determined by intangibles like Goodwill.

Rather than focusing on increasing this quarter’s sales, the role of marketing is helping and delighting customers. Making customers feel like guests or members of a club is a great way to increase the amount of value that you are providing them.

Seth says: just make remarkable products. Even though not all of us work directly in the product development team, we all have to think about how we augment the value of products by keeping value-creation in mind – baking in our marketing, as Bogusky has written about.

As difficult as it is to construct, a phone is just some metal and wires and it is really quite low value in terms of its tangible assets. Once we add services and software capabilities to the mix (what we at Nokia call the “solution”) then the value is greater. But still, the value really only exists once the customer starts to use the product i.e. once the solution meets the context in which it is used.That is where marketing should be focused.

It’s difficult to measure Goodwill, but it gives you super profits. Literally.

Goodwill is notoriously difficult to measure (sound familiar?), but it does exist. One method of valuing Goodwill is to look at the overall “super profit“: the difference between the profits made by investing the tangible assets into a business, rather than at the risk-free interest rate.

So, by definition, Goodwill is the super profit: Increase Goodwill, and you increase your profits.

How do you increase Goodwill? Make people feel special. Make happiness your business model. Do things that matter for the people who matter. Be an experience facilitator. It’s about pro-active customer service as marketing, but also about guest experience design. You measure customer satisfaction and happiness and focus 100% on that.

You do all of that good stuff, and when the finance people ask you why you are doing it, you tell them that you are creating super profits and building up the intangible assets they like to refer to as Goodwill.

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19 thoughts on “The Goodwill Hunters

  1. Molly says:

    Dan, this is a fantastic and inspiring summary of a people-based approach (with some seriously nice links embedded in there, thank you). Surely this mix of human common sense and direct business benefit can no longer be a low priority or ‘experimental’ element for companies when seen in this way.

    Incidentally, I’ve been playing with your PESH model, which I found v interesting in Exeter. For me it works better as HELPS – Help, Enable, Participate, Sell (with Listening right in the middle) – as really you only earn the right to Participate or Sell if you are helping or enabling in some way.

    Da Goodwill…

  2. artojoensuu says:

    Really good stuff Dan. I totally agree with that notion of value creation being born through the usage context as that’s where the true value is (as well as the conversations)

    btw, you should re-name your blog to Da Goodwill ;)

    Molly, really like what you’ve done with the PESH model. The way we’ve visualized it in the past has been to include the Listening component as a foundation to everything on the PESH model http://bit.ly/gx658 (not visualized in the pic btw) We didn’t want to mark it as a separate box as it’s fundamentally vital across all the boxes of the PESH model. You can’t really participate, enable, help or sell unless you first take the time to listen :)

  3. thx guys. Always appreciate comments.

    I think HELPS might actually be a better acronym than PESH. As Arto says, we considered listening fundamental, but it was never stated explicitly.

    Learning is also a good word, as you can’t learn without listening :)

    Plus HELPS focuses on the most important part of all: customer service.

    Loving it :)

  4. Jussi-Pekka says:

    HELPS nails it nicely, as it also states out the learning/listening part :D

  5. Spot on, Dan. Really inspiring post.

    Somewhere down the line (probably as an increase on the sheer amount of stuff going on in the marketing world), both agencies and clients have lost the ability to really sell in things that don’t have a short term, easy to measure impact.

    It’s part of the role to convince the CEOs and CFOs of this world of the potential gains that can be made by thinking and investing differently… and yet, from what I can see, it’s an art that we’re increasingly poor at as an industry.

  6. dagood says:

    @John

    I agree completely. I think that the industry was very good at selling that story that “this advertising is needed for the Brand”, but let down CEOs and CFOs by building “Goodwill” very artificially and expensively using this attention grabbing method.

    We now have the tools to build deeper, more genuine relationships and stronger bonds, which means “Goodwill” that lasts. But (depending on the business) it may not be noticed immediately in terms of this week’s sales: after all, the benificiaries of much of the efforts should be existing customers who may not need to repurchase any time soon.

  7. […] Daniel Goodall – The Goodwill Hunters […]

  8. dagood says:

    Found this great quote on the definition of Goodwill, from more than a century ago:

    “The term goodwill is generally used to denote benefit arising from connections and reputation.”

    Lord Lindley, 1893

  9. […] out the conversation on Senior Marketing Manager Dan Goodall’s blog. His latest post on The Goodwill Hunters is particularly worth a read (and make sure to mine his links for some excellent further […]

  10. Asi says:

    I hereby nominate you to senior VP for marketing for Nokia.

    Imagine what amazing things could have happen if they have adopted this kind of thinking…

    great post

    A.

  11. Holycow says:

    Dan – really nice post + links mate.

    One thing though – let’s not forget that the purpose of putting a number on ‘Goodwill’ is to establish a value that can be realized when the business is sold. It is a complex area and not linked especially to customer service – how lovely if it was but it isn’t. If you talk to any TO/M&A specialists the first thing they do is argue over the value placed on the intangibles such as Goodwill – no-one has a definitive measure of such things except perhaps Interbrand and a few WPP companies – and even those are discredited by the purchaser in many cases.

    I still find it surprising that so many people these days are marveling at the fact good products + great customer service makes lots of money for shareholders. Surely this has always been the case and hasn’t really been redefined by Gen Y?

    Anyway – good post Dan thank you.

    Best

    M

  12. dagood says:

    Thanks Holycow, truly appreciate the comment and insight.

    I agree with pretty much everything you said: Goodwill is very difficult to define and the basic components of a valuable business are certainly not new or redefined by Gen Y, it’s just we have some new tools to use and things are happening quicker.

    I do think the Goodwill eventually realized by a company is linked to their customer service though: Lord Eldon defined goodwill as “nothing more than the probability, that the old customers will resort to the old place.” Surely good customer service is one of the things that will most cause that “resorting”?

    There are other things of course (price, product quality, ease of availability etc), so you are right to say it is not that simple.

    And as you say: treating customers great has always been a good strategy. Now that these customers can tell more people about their experience more quickly, it is more important than ever – not just to solve problems, but to make people genuinely enthusiastic too.

    Anyway, cheers!

    Dan

  13. Darryl says:

    It seems the head of Unilever agrees with you (http://ow.ly/16ZxCV).

    Could be we’ve allowed the bean counters too much freedom in devaluing the word “value”. In a business context, it usually does, as our good friend Milton suggests, mean lining the pockets of the shareholders. And increasingly that means short-term.

    But companies have more stakeholders than just their shareholders: employees, customers, partners, neighbours, etc. All of them need to feel they’re getting some sort of “value” from their interaction with the company. And this is about more than just money. An employee’s sense of empowerment and worth can be much more motivating than a token raise. Strong customer loyalty increases a company’s “forgiveness factor” (the number of mistakes they’re willing to overlook).

    I *think* goodwill will become increasingly important in the not-to-distant future. Maybe even a hygiene factor. And developing a more sophisticated understanding of “value”.

    Before long, it might not be enough just to not be evil.

    Cheers
    Darryl

  14. neilperkin says:

    Another great post, Dan. Just to let you know that it’s shortlisted for Post Of The Month over on Only Dead Fish

    http://bit.ly/96WQ33

  15. Holycow says:

    Dan – thanks for the comment back – your right and Lord Eldon had a point too – except in his day they probably didn’t have a lot of choice so they came back anyway because the product was a good ‘un.

    And so there is just (IMHO) 3 things to think about and concentrate on from a marketing POV (rather than a protracted analysis of actuarial Goodwill valuations):

    1. Make sure you sell excellent products
    2. Make sure you look after your customers
    3. Make sure your advertising demonstrates how you are different from and better than the competition

    …and if you do these things really well your goodwill on the balance sheet magically goes up. I mention this as I have evaluated sufficient evidence to suggest that advertising can add substantial value to a business (Stella being the most obvious one) and it would be good to add that to your excellent piece.

    Cheers

    M

  16. […] more and more in the past few years in the context of business and marketing. I suggest you read an excellent post by a colleague Dan Goodall on the topic. Building on that thought, Umair Haque argues that […]

  17. […] A Heart At Like Minds James Ainsworth – Like Minds: More Than A Feeling Daniel Goodall – The Goodwill Hunters Peter Gold – Social Media Conferences: Time To Stop Talking And Do More Doing Gary Day-Ellison […]

  18. […] because they are inherently selfish. You will never build anything resembling loyalty; the goodwill that makes your business more valuable than its basic assets (ask an accountant for proof) will never […]

  19. Dude, you should be a writer. Your article is so interesting. You should do it for a living

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