ROC, they declare, is ‘a revolutionary way to measure and strengthen your business’.

You need the new measure, the authors argue, because the financial metrics usually taught in business schools aren’t easily adapted to account for the value companies generate from customers. Remember, customers are a resource ‘scarcer than capital’ in today’s business world.

The ROC formula, explained in the book, has the sum of ‘current period cash flow from customers’ and ‘change in customer equity’ in the numerator, and ‘customer equity at the beginning of the period’ in the denominator.

Customer equity is defined as the present value of lifetime value (LTV), relating to both current and future customers.

Current cash flows can be at the cost of future flows, the authors caution. “If a company fires off a truckload of direct mail or e-mail to generate more current sales from its customers, for instance, it might also erode their willingness to buy in the future, or even to pay attention to future solicitations.”

Likewise, cost-cutting efforts may not damage current customer cash flows, but undermine future cash flows.

“One frustrated manager at a magazine publisher actually confessed to an investor that whenever his company faced a bad quarter, they cut costs by halting their subscriber reactivation campaigns!”

Peppers and Rogers advocate a balanced approach to current profit and long-term value that does not encourage managers to ‘steal’ from the future to fund the present.

‘Steal’ of a read.

What causes a business downturn? “The most simple but possibly alarming answer to this question is… you,” says Jeremy Kourdi in ‘Surviving a Downturn’ ( www.penguin.com

“This means not blaming, complaining, justifying, defending, or withdrawing, but becoming actively involved, focusing your thinking and applying the skills and abilities you have to get the business out of its tailspin.”

Outcomes are a function of events and responses, explains Kourdi, using a formula: E+R=O.

“Being able to influence events would help, but clearly this is not always possible; what is achievable, however, is a positive, productive response leading to the right outcome.” The first challenge, therefore, is to adopt the right mindset.

Another tip, adapted from Jim Collins’ ‘Good to Great’, is to have ‘Big, Hairy, Audacious Goals’. Your goals must be motivating and measurable.

A book to help you ride the rough tide.

‘Club class’

Generally the good banks look at the risk appetite of customers before recommending them a mix of deposits, debt funds, and equity mutual funds. “These banks would endlessly research the markets and advise customers appropriately, even if it meant throwing away a chance to make a few dollars. NYB was definitely not one of them.”

Thus reads a snatch from

‘If God was a Banker’ by Ravi Subramanian ( www.landmarkonthenet.com

Is the abbreviation ‘not your business’, you may wonder, but it might help to know that NYB had three categories of customers – value plus, super value, and club class.

The last category was the most pampered, consisting of those with ‘relationship value of over one million dollars’. For instance, “NYB once hired a helicopter to ferry a club class customer from Mumbai to Pune, when a landslide had blocked the highway.”

To one such customer, an NYB staff says, “We will take care of your money as if it’s our own.” That was when the equity markets in India were going through a bull phase.

They still do? “Investment products and insurance sales were the mantras and every bank was selling them… Customers were being convinced to move money from fixed deposits to mutual funds. This was not without reason.

The mutual fund companies paid the banks a commission for every rupee of mutual funds sold. The money that the banks made on mutual fund sales was more lucrative than holding them as deposits…”

Racy pace.

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