How do you compete in a globalized market? Think outside the box? Pull out all the bells and whistles? No, argues Patrick Barwise, author, with Seán Meehan, of the new book, Simply Better: Winning and Keeping Customers by Delivering What Matters Most (Harvard Business School Press, August 2004). According to Barwise, businesses who have sought to differentiate themselves in the marketplace through unique features, benefits or positioning have been missing the forest for the trees. While they think they’re delivering what the customer wants, they’ve actually left their customers on hold and dissatisfied. In this edition of Inside Scoop, Bob Thompson, founder of CRMGuru.com, talks with Barwise about the book and his recommendations for turning things around.
The following interview, which took place Feb. 2, 2005, was edited for length and clarity.
Bob Thompson
Patrick, I’d like to welcome you to Inside Scoop.
Patrick Barwise
Delighted.
Bob Thompson
I’m very excited to explore some of the ideas that you presented in your new book, Simply Better, co-authored with Seán Meehan. Welcome to our program.
Patrick Barwise
Thank you.
Bob Thompson
I had the pleasure of hearing your presentation in Las Vegas late last year. And I’m very excited that we have a few minutes to chat about this book, because I think it is a bit of a challenge to some of the conventional wisdom about business strategy and what customers really want. In fact, the sub-title of your book is Winning and Keeping Customers by Delivering What Matters Most. I think that’s a challenge that all business executives have these days.
Patrick Barwise
Yes, focusing on what matters most doesn’t come easily.
Bob Thompson
Tell us a little bit about your current position at London Business School, and what kinds of things are you working on.
Patrick Barwise
My title is professor of management and marketing. I’m very interested in the issues around Simply Better. I also get involved in some other things, like marketing expenditure trends, and I do quite a lot of stuff around television audience, PVRs, things like that, advertising. But the big thing for me is the broad issue of: Why is it that firms are not doing a very good job at looking after their customers, when most of them think they are?
Bob Thompson
I think one of the comments you made on your book, as well as your speech, was that, despite all of the talk about the customer being king—and we’ve spent massive amounts of money on CRM technology and loyalty programs and on and on— are customers, in fact, more satisfied now than they were, say, 10 years ago? And if not, why not?
Patrick Barwise
It’s about the same. I think if anything, it’s getting slightly better, because firms are now refocusing on the basics, and they’ve realized that what customers want is simplicity and reliability. But it’s much lower than it could be, partly because customers’ expectations have gone up. So what? Actual service and product quality has not improved in the way you’d think from the rhetoric, maybe because of some of these cost-cutting programs, maybe because management has been distracted with other stuff and is more interested in the new, exciting things than in focusing on reliably delivering the basics. But that’s what customers want.
Bob Thompson
I don’t get it. What’s so difficult about this? Your proposition in your book is, “Give customers quality products.” I think this is a direct quote: “quality products, reliable services and value for the money.” I’m thinking every business leader has to get up in the morning and say, “OK, I’ve got that done. Now, I’ve got to figure out how to differentiate on something else, because everybody’s doing the basics: quality products, reliable services, value for the money.”
Patrick Barwise
I think that’s the problem. They get up in the morning and they say, “You know, the market’s so competitive.” They’ve all become commoditized. So we can tick that off and then we have to think: How can we differentiate by doing something which is unique or just through branding or whatever? Actually, that’s the wrong priority. The sub-title of our book is, Winning and Keeping Customers by Delivering What Matters Most. And what matters most, if you take a true customer perspective, is that you’re absolutely rock solid; you’re as good as Toyota at delivering the basics very reliably.
We give quite a few examples in the book of companies that have done that, but although the message is a simple message, it’s very difficult to do. Execution is not easy. It’s constant, hard work, and in a sense, it’s not surprising that companies are failing so badly.
Bob Thompson
If I can paraphrase this—correct me if this is the wrong way to put it—you seem to be saying that execution or consistent, good execution can be a differentiating strategy for somebody.
Patrick Barwise
That’s exactly right.
Bob Thompson
That’s a bit at odds with other gurus, who are proposing a unique selling proposition or creative differentiation, branding—these ways to really stand out. You’re saying: Stand out by just doing the basics correctly. Is that right?
Patrick Barwise
That’s exactly right. I think that there’s a real difference. It’s not a black and white difference, but it’s a real difference of emphasis. Our starting point is looking at real customers and the way they choose brands. What we don’t see is people very often choosing a brand because it actually offers them something unique. What we mostly see is that the dominant brands and the strongest brands are the ones that have built up a perception in the mind of a customer that they will deliver the basics, not just reliably, but more reliably, possibly better and, quite often, better value for money than the competition.
Bob Thompson
Can you give me an example?
Patrick Barwise
Toyota’s a great example. My favorite example is the plant that is a joint venture with GM. It makes one kind of car, which is either branded Chevrolet or Toyota. Same car. The only difference is the brand name. The Toyota car not only outsells the Chevy by 3 to 1, but also Chevy has to give away much bigger discounts and incentives in order to sell even that many, and that’s the same car. That’s because Toyota is a much stronger brand than Chevy in the U.S. now, despite Chevy being very well known and having a tremendous heritage. That’s based on years of customer experience.
Bob Thompson
Let me argue with you for just a second, if I could.
Patrick Barwise
OK.
Bob Thompson
What about a company like Harley Davidson, which, until recent years, had quite poor execution, poor quality products and lots of problems in their operation? Yet, their customers remained loyal because they had this almost a cult-like following. A very strong brand with a kind of shaky product. Does this fit into your theory?
Patrick Barwise
That was true for many years, and it’s always going to be a combination. Harley happens to be a very iconic brand. The value of that brand and that company has grown a lot in the last few years, because they’ve done a combination of making better products and some very good communications. I’m not saying that some niche brands don’t exist. And I’m not saying that there aren’t some categories like, say, premium fragrances or beverage markets, in which the pure brand communications have a bigger role. But in most markets, the main source of brand equity is that products under that brand have consistently delivered the category benefits better than the competition.
Bob Thompson
Let’s take a different example that’s not one of these big brands that people know. How can a smaller business take advantage of the thinking that you’re talking about here? Some of these smaller businesses could be huge companies. They just don’t have a brand like Procter & Gamble, or Colgate or Toyota.
Patrick Barwise
The message is a very simple message, but, actually, executing it is extremely hard work, whatever the size of the company.
Bob Thompson
Why is that?
Patrick Barwise
Because it goes way beyond the marketing department. It’s going back 50 years to Peter Drucker’s marketing concept, which is that the whole organization can only succeed by meeting customer needs better than the competition, obviously at a profit. You know, you have to take account of costs, and it’s not just something which the marketing people can do. It’s much more about operations and execution. It has to be the whole organization, and it’s very difficult to keep an organization truly customer-focused. We are naturally selfish animals. Looking after customer needs comes easier to some people than others.
Bob Thompson
What would be one thing you could do that would help? If you were the CEO and you really wanted to be customer-focused and you understood the value of execution, how would you, in fact, get a large organization, or even a small one, to stay on that topic?
Patrick Barwise
I think it has to be a combination of doing your best to hire people who actually want to satisfy customer needs, and obviously, creating conditions which encourage them to do so. On the first, I’ll give you a U.K. example, which was the First Direct bank, originally a telephone bank. It’s now more Internet. When they set up, they didn’t use people who’d worked for banks. They used nurses and teachers in their call center, because those were people people. They had to make sure the information technology supported those people, but the people they were hiring were people who liked people. It’s much easier to hire people who like people than it is to take someone who doesn’t care and try and motivate them to care, because that’s not their personality.
So one piece is: Just who are the people? Obviously, that’s easier if you have a start-up business, but it should be one of the principles. The other is just treating customer focus as the top management’s own priority, not just in what they say, which already happens, but in what they do. That means actually spending time with customers, talking about their problems. In a large service business, it might mean spending a day in the call center, possibly handling calls, yourself, or going down to the site, if you’re a building company, and experiencing what it’s like for the people who are actually trying to do the job. There’s no single answer, but you’ve got to bring into the company what it feels like to be a real customer.
Bob Thompson
It’s easier said than done, isn’t it?
Patrick Barwise
It’s easier said than done. We call it Simply Better, but we’ve never pretended that—
Bob Thompson
You didn’t say it was simple to be simply better.
Patrick Barwise
Exactly. It’s not easy to do. It’s very hard work. But it’s an upbeat book, because we think that there are plenty of examples which show that you can differentiate the basics.
Bob Thompson
Let’s talk about one of them. I was intrigued by this case study, because it seemed like such a perfect example, with Orange in the U.K. starting in a similar timeframe and having quite a different outcome vs. one of their competitors. Could you share a quick story?
Patrick Barwise
That’s exactly right. It’s a story with a slightly sadder ending, because it now belongs to France Telecom, and they’ve somewhat changed the strategy in a way I don’t agree with. But when they launched, and this was in the early days of second-generation mobile telephony, it was basically a voice market. You would think it was a pure commodity, but they launched more slowly than the competitor, because the competitor believed being first to market was very important and, therefore, didn’t take as much trouble to build the quality in. And Orange didn’t rip off its consumers. It had a simpler price tariff. It introduced per-second billing. It had fewer dropped calls, etc.
And then, when the main consumer organization in the U.K. came along 18 months later and looked at customer satisfaction, Orange was the one with the highest customer satisfaction. And that was in what people assumed was a commodity business. So they didn’t try to segment the market. They didn’t try to differentiate by having a really different positioning. They went for the mass market, with a very simple proposition, which was, “We provide it better.” And they were not the cheapest. In fact, the incumbents cut the price, and after 18 months, Orange was, in fact, the most expensive. But they were still seen as the best value for money.
Bob Thompson
There’s an interesting parallel in the CRM software industry, where there’s a growing category of companies, so called “on demand” solution providers. And it’s basically a hosted CRM software solution. And they aren’t providing any real new functionality. In most cases, they don’t have as much functionality as established players in the market. But what they are doing is providing a very usable, cost-effective and easy-to-implement package in a way that people can pay for it. It’s not even necessarily cheaper over the long term, but the combination of things hits the sweet spot of what a lot of customers are wanting in this category, with companies like salesforce.com and RightNow Technologies and others.
It’s growing very, very rapidly, and if you look at it, you say, “Well, wait a minute, their functionality’s not that amazing.”
Patrick Barwise
Exactly.
Bob Thompson
Why are they doing it?
Patrick Barwise
It’s not rocket science. It’s all execution. I think that one reason our book has done so well is that the timing is quite good. I think it’s now more widely realized that technology has not, in general, simplified our lives. It has enabled us to do things we couldn’t do before. But people are very time-pressured now, both in businesses, and consumers. And what they’re looking for is to simplify their lives. And if you can simplify someone’s life, then in the case of that application, it probably is cheaper in the long term, because unscrambling technology that doesn’t work or is hard to implement, that has enormous costs.
Bob Thompson
Let’s close with a simple, but not easy question: What does this idea of being simply better have to do with customer relationship management?
Patrick Barwise
I think it has an enormous amount to do with customer relationship management, because very often, even if you’ve got the right people dealing directly with customers—even if they’re trying to do their best—they’re quite often having to deal with systems in which the bits are not properly joined together. So they’re kind of the person who gets shouted out on the phone, but the technology is not supporting them in such a way that they can there and then solve the customer’s problems. We all know that there has been quite a big gap between the rhetoric of CRM 10 years ago and the fact that there has been a lot of corporate disappointment, because it’s hard to do. But the benefits, if you do do it well, are enormous.
One of our examples is Tesco. Tesco is a great company in many, many ways. It’s now the biggest online supermarket in the world. It has a very good loyalty card. But part of the success of Tesco came from the fact they put in very robust, very simple systems, and they built it up over time. So they’ve worked very hard at the bits which the customer doesn’t see.
Bob Thompson
I remember one story. I interviewed somebody at Tesco, and they were talking about when they launched the Clubcard, it was an absolutely massive amount of work. You think about all the stores, all the people, all the little hunks of plastic. I mean, just millions of details and training. And they did it with almost military precision.
Patrick Barwise
That’s exactly right.
Bob Thompson
So it was not just a good idea, and it was not just a program in the computer. They executed right down to training the clerks on the front line and did it in a very, very narrow time frame. And I was so impressed with that, that ultimately, that’s how they got the quality of that program, to where they got the data. And then the data led to a lot of other benefits.
Patrick Barwise
It did. And interestingly, they went against the sort of textbook thing. Fifteen years ago, they were clearly No. 2. They were miles behind Sainsbury, which was the dominant supermarket. And they did not try to outflank Sainsbury or anything like that. They came straight through the middle by getting all the detail right and all the execution better. And the rest is history. Their market cap is now, I think, five times Sainsbury’s market cap.
Bob Thompson
Yeah, it’s been an amazing story. Thank you very much, Patrick, for sharing your thoughts about your new book, Simply Better.
Patrick Barwise
I’ve enjoyed it.
Bob Thompson
To me, it’s one of the most provocative books that I’ve read in quite some time, because it really attacks some conventional wisdom. And you back it up with some solid research and some great examples. Personally, I think it offers some hope to any business, that they can take care of the basics, and if their competitors are not doing that, that’s a source of competitive advantage right there.
Patrick Barwise
That’s exactly right. It’s an opportunistic book, and the starting point is looking at real research about real customers and what matters to them. And I think we’ve lost quite a lot of that, so we’re pleased. You know, we’ve sold 10,000 copies, already.
Bob Thompson
Wow, that’s great.
Patrick Barwise
Which is a lot more than expected, and they’ve sold a lot of foreign rights, and so on. So I’m very pleased about the way it’s gone.
Bob Thompson
Well, good, I’m certainly encouraging our CRMGuru members to pick up a copy, and I believe they can buy it at Amazon.com and other book stores.
Bob Thompson
Thank you very much, Patrick.
Patrick Barwise
Thanks, Bob.
