Dick Lee asks a provocative question in his new white paper: What’s next after customer-centricity?
He sums up customer-centricity as follows:
The common implementation-level model coalesced into a structure implementers could grab onto and follow. Theory aside, becoming a customer-centric company meant an amalgam of customer-driven business strategies, customer-aligned process, CEM, CRM (customer relationship management) technology – and a dollop of highly targeted marketing, often supported by marketing automation technology and marketing analytics.
What Dick seems to be saying is that customer-centricity is a mashup of different ideas. Start with a little CRM, season it with CEM, then add process management and analytics as side dishes. Voilà – you’ve got customer-centricity!
While it’s true that these concepts are all out there in the market, in my research I don’t find any consensus on what customer-centricity is, or isn’t. There’s no common implementation model. Some promote the CRM model and others the CEM model. Some say the answer is to create a “social business” and others believe companies should “compete on analytics.” And each can claim, at least in part, that they are “customer-centric.”
According to Dick, customers are becoming more individualist, more cynical, less civil and increasingly turning from “hunted” to “hunter.” I largely agree, but see this as just a continuation of consumer empowerment that’s been strengthening for decades.
But I think it’s worth discussing some of the “Assumptions” and “New Realities” that Dick asserts in his paper. Are these really new or even happening as Dick describes? (Note: the bolding is mine.)
- Assumption: Customers are looking for win-win relationships with companies
New reality: While sentimental “Main Street versus Walmart” customers will never disappear, most buyers want the best deal for themselves, without regard for seller welfare. “What can you do for me next?” is replacing “What have you done for me lately?” In buyer-seller relations, the past is no longer prologue.
My take: I’m not sure that buyers ever had much concern for the seller’s welfare, except in some edge cases like small towns. But smart companies that succeed strive to deliver value (win for customers) while driving company value (win for company). Win-win is a company strategy, not the customer’s strategy.
- Assumption: Most customers are willing to “play nice”
New reality: More and more customers, even Boomers, are “going over to the dark side.” Buyers are becoming more cynical, jaded, mistrustful and resentful of sellers – leaving them quick on the trigger when companies cross or fail them. With so much negativity in play, even wowing customers with great service doesn’t necessarily carry through to the next interaction. Moreover, customer pushback is now expanding to include seller positions on social issues, a real powder keg.
My take: This is overly negative. The research I’ve seen is that the majority of online reviews are positive. However, it’s certainly true that it’s easier for a negative situation to go viral. As Dave Carroll of United Breaks Guitars fame says: “No customer is statistically insignificant.”
- Assumption: Sellers can accurately profile their customers
New reality: Market segments are splintering into “universes of one,” leading to increasingly idiosyncratic customer behaviors. That doesn’t bode well for profiling, which even previously seldom met predictive expectations, except in the hands of the very best customer analysts/statisticians. Nonetheless, overuse of profiling will die hard, because so many customer-centricity advocates have built executional models around it.
My take: I have exactly the opposite opinion here. Analytics technology is getting simultaneously more powerful and easier to use. I think the future of 1:1 is finally becoming possible, and won’t depend on just the hands of a few “statisticians.”
- Assumption: Buyers appreciate frequent seller contact
New Reality: Here’s another assumption that will die hard. Maintaining constant customer contact gives marketers work to do and their agencies a revenue source. But customers face such an immense volume of “buy, buy, buy” messaging, little of which they believe, they’re pushing all of it away – even messages offering real value to them (which, admittedly, are few and far between).
My take: Don’t agree with the assumption, and the reality is already here. Targeted and relevant messages are, and have been, more likely to be acted on. That said, Dick is right that it’s still all too easy for marketers to spray and pray (social media is latest attempt). Smart marketers have known better for a long time.
In general, while I agree with the general trend of consumer empowerment, the “new realities” seem like an overly dire outlook for companies.
Dick wraps up with this: “What will be left of customer-centricity – and will it still matter?”
Actually, as long as a sizeable portion of the customer base continues to “pay nice,” tactics developed within the context of customer-centricity will continue seeing widespread use. However, customer-centricity will be one way of interacting with customers – not the way as advocates have always hoped. And the more buyers try insulating themselves from sellers, a train that’s definitely left the station, the smaller role customer-centric business practices will play. Rather a quiet winding down of a “movement” that created high hopes, lots of noise, and at least some action. However, time marches on…as do customers.
My take is that Dick is looking at customer-centricity something like Sampson Lee, who says Customer-Centricity Is Not the Solution; It’s the Problem. And like Sampson, Dick is right — IF you think of customer-centricity in the way he describes. Do you?
I believe that customer-centricity should be about delivering customer value in a profitable business model. I don’t think that’s going out of style anytime soon, even if the “new realities” come to pass as Dick suggests.
Dick’s thought-provoking paper is available for free download (no registration required) in CustomerThink’s premium content library: After Customer-Centricity Comes…?
Take some time to read it, then add your comments!
….with regard to how customer-centricity should be defined, and applied. Essentially, customer centricity is about identifying and delivering customer value within a profitable business model. In my article on the subject from earlier this year – http://www.customerthink.com/blog/customer_centricity_vs_customer_friendliness_vs_product_centricity – I opened the definition up just a bit more:
“Customer centricity is a strategy to fundamentally align a company’s products and services with the wants and needs of its best customers and those which can readily be bootstrapped (through research segmentation tools such as advocacy level) to become more financially attractive. It is about identifying the most valuable customers and then doing everything possible to bring their (positive and negative) ideas into the center of the enterprise, create value for them, generate revenue from them, and to find more customers like them. That strategy has a specific business outcome goal: more profits for the long term.”
My concern about the similar perspectives expressed by the Mr. Lee #1 and Mr. Lee #2 is that both are insinuating that, given an identified set of “assumptions” and “new realities”, the baby should be thrown out with the bathwater. That strikes me as a little too polar a position.
Michael Lowenstein, Ph.D., CMC
Executive Vice President
Market Probe (www.marketprobe.com)
You make some great points Bob and I feel I’m with you on this!
The definition of marketing that I use, and I would argue, the definition of customer-centricity, is “finding, attracting and keeping the customers you want and maximising financial returns’ ( I do recognise that definition itself is open to debate!)
It’s EVERYTHING your business does to find and attract customers, and crucially, develop relationships with them that encourage them to stay, and keep coming back!
Yes, we’re in a world of greater customer choice, rising customer expectations, ever increasing ‘transparency’ and therefore those that do the above things badly, struggle, and those that do it well, have a better chance of winning.
In other words, I would suggest that the difference between customer – centric, and non customer centric organisations is getting bigger, and will continue to do so.
In terms of the ‘assumptions’:
1. MANY customers are looking for Win -Win relationships: the challenge is to find and attract those customers ( see Assumption 3)
2. Lots of customers are willing to be ‘nice’ and say good things, but yes, many say bad things – customer-centric businesses monitor, and respond, to these things and turn ‘disappointment’ into ‘delight’. Good news (as well as ‘bad news’) spreads quickly – this again widens the gap between the customer-centrics and ‘non’!
3. This provides real competitive advantage for customer-centric organisations. It does mean ‘profiling’, and the tools are there to do this – I believe customer-centric business’s ‘Choose ’em or lose ’em! That means they focus on the customers they want to do business with.
4. Customers do not want to be ‘bombarded’ with ‘buy, buy, buy’ messages, but many do appreciate stuff that ‘educates’, ‘stimulates’ and ‘interests’ them. By definition, customer-centricity encourages organisations to send stuff that’s relevant and ‘value adding’. Today’s (and the future’s?) technology allows them to do this in a targeted manner!
My conclusion (for what it’s worth!) is that there has never been a more important time to be ‘customer-centric’, and that this will prevail in the future!
I agree and disagree with a bit of everything at the same time. I agree that customers want value, but they also want to be treated as individuals. If businesses treated their customers as people first and made their customers feel important, appreciated and welcomed, it would be a better world for all us. It’s a crazy and fast paced environment, with technologies changing the way we live every minute of every day. However, I know that so many of my purchases accompany an underlying personal emotion. Can I afford this item? Will it look good? Is the best neighborhood for my kids? Does this sales representative really care about me? Can I trust this company? etc, etc. Those companies that understand that every customer is unique will flourish no matter how mobile our society becomes or what the latest business philosophy might be.
While I’ve always liked the term/phrase “customer centricity,” it is really just another phrase for a culture focused on the customer. All if the information in this article, and more, apply to creating a customer focused culture. Doesn’t matter what you call it. It’s all about the customer. And, when customers realize that is the way your company operates, they want to do business with you.
Interesting post and comments. I think the core question for customer centricity is whether it is an inside out strategy or an outside-in one.
Inside out customer centricity seems to be all about trying to do things to make customers feel like you care–almost like imposing your will on them.
Outside In customer centricity is more in keeping with the times. its, as you say, about delivering customer value (that limits defections) in a profitable business model.
While I also agree that win-win is primarily a business strategy, savvy customers will be more willing to support a win-win model–recognizing that a stronger vendor means better products and services for them (as long as they are confident that the vendor will use their side of the win to focus on customer value).
Shep, I understand what you mean by “customer-focused culture” and it’s very much what the core idea of “customer-centricity” is about in my view.
But you should know that “customer-focused” is also commonly used to mean “customer-targeted.” Companies are focused *on* their customers so they can make more money from them, via targeted marketing for example. But the customers don’t perceive it as the company genuinely caring about their needs.
As an example, when I receive a bit of direct mail that was the output of a marketing automation system, this is not necessarily the result of a customer-focused culture.
Said in a more cumbersome way, I think we’re both talking about a culture that focuses on delivering value to the customer. And of course doing so in a way that also drives value to company stakeholders.
….the final paragraph of your response to Shep captures the essence of customer centricity in a fairly succinct, and not so cumbersome, way.
It’s hard to agree or disagree with both Bob’s and Dick’s articles. Likewise, the article could have just as easily been written 10-20-30….. years ago.
A lot of the trends that are cited are true, for example the lessening of civility–but this is not just a buyer/seller issue, this is a general social issue. Within our companies, within our communities, there is a lessening of civility.
Technology has made problems that have existed for milleniums increasingly visible.
Many of the issues are core to company business strategies and not to the buyer seller relationship. In fact customer centricity is more a company value system/business strategy issue than it is a sales/buying issue.
In looking that the assumptions Bob outlines:
1. Assumption: Customers are looking for win-win relationships with companies. I think it would be wise to look at the positions of sourcing/buying professionals. The leading thinking of these professionals is they are looking for win-win relationships and they do care about their supply chains. In more and more cases, a failure in the supply chain can create catastrophic consequences for the company. Sophisticated buyers are looking at these issues, assessing risks, and making sure they are creating relationships that promote the long term viability of their vendors. Will they always seek the best deal they can get, absolutely, and they always have. The problem sellers put on buyers is they fail to differentiate their offerings in ways that are meaningful to buyers. In that case, the only way to differentiate is price.
2. Assumption: Most customers are willing to "play nice” Frankly, I’m not sure I get the point of this or whether it is even meaningful. But it certainly begs the question, Are most sellers willing to “play nice” It’s been my experience the way you treat behave to your customers is generally recriprocated. Abuse your customers they will abuse you. Treat them with respect, deliver value to commitments, they will treat you well. There will always be exceptions, but so what.
3. Assumption: Sellers can accurately profile their customers. This is an area where I tend to agree with Bob. The availability of data and BI/Analytic tools provides tremendous ability to profile customers and truly look at serving markets of 1. But this concept is hardly new. Joe Pine wrote about this in 1992 with his book Mass Customization, and similar ideas preceded him. The evolution of this much more achievable. The issue is, however, while the tools provide this potential, are we able to do it smartly?
4.Assumption: Buyers appreciate frequent seller contact. Like Bob, I disagree with the assumption. Buyers appreciate appropriate seller contact. In my career of selling, frequent seller contact has never been an objective of buyers and I tend to doubt it ever has been. Buyers have always wanted and will continue to want appropriate seller contact. The channels through which we contact them and engage them may change as technology allows different possibilities. We have enriched face to face, complementing it with telephone, then email, then social, texting, videoconferencing. Probably soon we will have holograms and potentially Vulcan mind melds. Regardless of the means and technology, each of these engagements is appreciated and relevant if it creates value. If it doesn’t—well we know the answer—and we’ve always known the answer.
The sun will continue to rise and set. We never debate that this will continue. Customer centricity or what ever fashionable phasing we invent will always be an issue and a challenge.
Thanks for the comments, very interesting!
Regarding “win-win” thinking by customers, count me as a skeptic for B2C, maybe with a few exceptions of high engagement brands. My feeling (sorry, no research to back this up) is the most consumers care about their value, and don’t spend much time worrying about whether the company is making money. Especially when there are several alternatives in the market.
But I agree B2B is different, as Dave articulated very well. Savvy customers know that their suppliers have to “win” too, because if the supply chain isn’t viable the company won’t succeed. Again, if there are suitable alternatives that “concern” will be quite limited.
Broadly speaking, I still feel it’s the company’s job to strive for a win-win. In certain cases the customer may have an interest in the supplier’s “win” but I think it’s limited to complex B2B.
Bob, absolutely agree–my perspective always is biased to the B2B perspective. It do think this is a real challenge at the B2C level–ufnrotunately, over the past decades we have seen the decline of the “local” customer focused B2C stores (think the local book store, hardware store, etc.), replaced by the depersonalized experience of the “category killers,” being displaced by the web……..
To the degree that B2C leads B2B, the outlook for B2B is challenging.
Every one of us is a customer, so this should be a very simple topic to understand. What do you, as a customer, think it means for your suppliers to be customer-centric? For me, it means they “get me” to the extent that I can easily access and use their offering that helps me do something in my life/business. Just stick with that statement and the gems are there:
– “easily” typically means without much cost in terms of burdens in financial, time, worry, effort aspects
– “access and use” typically means both finding the solution that helps me get something done *and* using to get something done (pre-purchase and post-purchase)
– “helps me get something done” typically means that whatever I buy is a means to an end — I don’t wake up each day and think about how much I’d like to buy a widget or how much I’d like to distrust, get the upper hand, be mean, receive or ignore messages. Those things aren’t even on my radar screen as a customer. I’m just trying to live my life.
Note that as a customer it’s all about me. Sure, I may like to provide feedback to my suppliers, but typically because I hope it will help me in the future — or at least help a fellow human being not experience the pain that I might have experienced. And this is the foundational fallacy of most CRM/CEM/NPS/C-Sat/etc. endeavors: companies tend to ask questions from their perspective, to map the customer journey from their perspective, to incent employees from their perspective, and on and on — NOT from the *customer’s perspective*.
To be customer-centric, companies need to simply see things the way customers see them, and center their daily decision-making accordingly, with all other aspirations being secondary to seeing things the way customers see them.
Why would it behoove a company to be customer-centric? Because customers enable the monetary machine. Shareholders leave when customers leave, not the other way around. When companies *align* with customers, they abandon non-value-add and wasteful efforts, policies, processes, behaviors, time, and costs. And alignment helps customers sense that the company *gets* them, leading to organic customer evangelism: retention, share of wallet, positive word-of-mouth … company growth.
All of the “Assumptions” and “Realities” in this article are not stated from the customer perspective in the first place. They’re stated from the faulty perspective of companies. Customer-centricity is not a way of interacting; it’s a way of life that must transcend the front-line to incorporate the ripple effect of hand-offs across the entire internal value chain enterprise-wide. Marketers, engineers, accountants, and everyone else in the value chain will only be customer-centric when they view their roles as advocates for what’s important to customers — when they put other aspirations first, they’ll always be at odds with customers and creating waste, distrust, and ill will. Those things aren’t created by customers, they’re created by people within the company.
As Bob notes: “customer-centricity is a culture that focuses on delivering value to the customer” — and I’d like to add that it’s a culture that prevents non-value to customers. This holds true for both B2B and B2C. (However, among B2B purchasing processes, the customer often abuses the supplier via extensive periods for payment terms, hurry-up-and-wait, non-win-win legal terms, etc. — supplier management and purchasing agents need to be aligned with the company’s customer experience excellence principles, because you can’t expect your customers to love you, but not show love to your suppliers — that’s not sustainable, as unhappy suppliers will have a ripple effect eventually to your customers’ well-being.)
Very few companies have ever been truly customer-centric. Hence, many people view this as a buzz word, jargon, something fleeting, a misguided concept. But let’s get real: since YOU are a customer, you do know what it should really mean.
Encouragingly, I’ve been receiving more and more inquiries from companies that feel the need to nurture a customer-centric culture, and it’s exciting to see them discover so many gems they have at their fingertips to make significant inroads in establishing customer-centricity as an enterprise-wide way of life.
“The beginning of wisdom is to call things by their right names.” –I read this yesterday in an article about the crisis in Syria, and whether it’s appropriate to term it a civil war.
The quote fits customer centricity, too. There are a lot of things people call–or proclaim–as customer centric that really aren’t. Flawed assumptions, as I just read from Bob’s commentary, are one probable root cause. I agree.
So the effort to expose and question assumptions is very worthwhile.
#1: Customers are looking for win-win relationships.
My take: good assumption. If the idea win-win is corroding away, replaced by “all I care about is the best deal!”, then there’s a great threat to buyers and sellers having a mutual exchange of value. For me, that is foundational for customer centricity.
Like Dave, lately I haven’t seen any manufacturing company with a complex supply chain seem uncaring about the vitality of its critical component vendors. Just ask anyone who works for Toyota.
#2: Most customers are willing to "play nice.”
My take: yeah, I pretty much agree. Customers aren’t becoming nastier. But I think that some companies are now so good at delivering fantastic customer experiences that certain customers know that companies can do better, so they are prone to acting bitterly disappointed when their experiences fall short of expectations.
e-commerce websites should be boneheadedly easy to use. I know they can, so I sometimes get rankled when they’re not! On the other hand, I seldom get hot and bothered when I have a cruddy flying experience. More likely, I’d be surprised if I didn’t.
#3 Sellers can accurately profile their customers.
My take: theoretically, this is true. The tools are there, but things won’t change until cultures do. In application, there are too many “old school” marketers who still lump customers into large demographic sacks like “soccer mom’s” or sanitize their unique characteristics altogether by using faceless terms like “our average prospect . . . ”
#4 Buyers appreciate frequent seller contact.
My take: boy, I wish this assumption would die, because it drives so many awful tactics and behaviors: “We find, on average, that it takes five contacts for a salesperson to make that first appointment.” So sales executives reward Tom and Jennifer for making lots and lots of fairly useless and annoying contacts. Why? Because they’re making their ‘required numbers!’ How dumb is that?
Things would go much better if vendors used a different assumption altogether, such as “Buyers appreciate communication that is valuable and useful to them.”
I don’t think that assumption is perfect, either. But when I think of customer centricity, I think it’s much healthier than the frequent contact one.
Bob I thought I would jump in here as its the culture side that my consultancy focuses on.
From reading your post I can see our thinking is aligned.
Unfortunately there can be a lot of confusion around these terms, so we tend to use the language our customers use which is generally “customer focus”. In their minds they are internally focused or product focused and recognize a need to improve their “customer focus”.
This manifests when they see declines in business results due to again in their minds a loss of “customer focus”.
To Dick’s article I would suggest customer centricity is more important now than ever, a primary reason for customer centricity is competition. Without competition businesses don’t actually need to be customer centric. With competition intensifying in every industry across the globe the need to provide more value than alternatives is just accelerating.
The only way to provide more value is to produce something customers will pay for and the way to discover what they will pay for is by having a company focused on their needs.
The reason it needs to be cultural is that business is a team sport, everyone needs to play their role in delivering the “promise” companies make to their customers around their products and services.
To your direct mail example Bob, if that was mail that was not relevant that is simply a poor targeting choice at a tactical level. The company that sent it clearly is trying to attract new customers but in the wrong way.
A customer focused company would review its acquisition strategy and decide whether that approach fits with its overall value proposition for customers or whether that approach is actually devaluing its brand and annoying potential customers rather than attracting them.
Chris, I still think (and my research backs this up) that when companies decide they need to be more “customer focused” instead of product focused, they don’t mean it in the holistic sense that you advocate.
Instead, a common first step — with help from CRM and other marketing technologies — is to organize targeted marketing activities around customer and their segments or profiles, instead of around products.
That’s a decent first step, but falls far short of becoming a customer-focused culture.
Defining customer-centricity and customer-focused is a bit like nailing jello to the wall. I made an attempt at identifying 4 stages of development in my article: Let Your Customers Inspire You! Four Stages of the Customer-Centric Journey.
However, I’m thinking about change my “stage 1” to “customer-targeted” to better convey what I mean.
Bob, I like the model, I agree customer-targeted is a better description of stage 1.
This model is a useful way to ID where companies are and create some tangibility as to what they are trying to actually achieve with any customer centric initiative.
Most of the companies we work with are in stage 1 and 2, often recovering monopolists.
Also some companies have taken their eye off the customer and focused too much on technology or engineering without enough insight from customers to really be leading the marketplace ie stage 3 and 4.
Lynn, thanks for a great perspective on a complex area.
Customers tend to say a company is “customer-centric” when it’s delivering value they care about. It’s really the same as looking at loyalty drivers. Quality products, good experiences, etc.
Companies tend to focus on how they are managing, or attempting to manage, customer-related processes.
So it’s easy to see why a company can say “I’m being customer-centric” when it is doing a VoC campaign, targeted campaigns or whatever, and yet customers don’t really “feel” that the company is customer-centric at all.
In the end, the only thing that matters is what customers perceive. To change that perception takes work and time.
We’ve had some really good dialogue about this issue. I absolutely support your premise. The result of customer-centricity, the product if you will, is how the customers perceive the value of the product or service they receive and how much trust and believability the enterprise is able to create.
This is something I addressed in my very first CustomerThink blog of 2012 – http://www.customerthink.com/article/inside_out_advocacy_creating_and_sustaining_customer_centricity_and_loyalty – when I looked at what I described as “inside-out advocacy creation”, aka customer-centricity. For me, one of the best references for understanding how to do this at an enterprise (large, medium, or small company, almost irrespective of industry) comes from the book, Firms of Endearment. Commenting on the book itself, and the authors’ concepts, I said:
“…it’s important for organizations to understand that customer commitment and advocacy behavior can result in one of two ways. The first way, which we identify as generation of “inside-out” customer commitment and advocacy, is where companies endeavor to manage and influence attitudes and perceptions of customers (and prospects), as well as where, how, and when communication takes place.
Though there are many thought leaders who offer insights into how organizations can produce benefit for stakeholders through culture and value, Glen Urban, professor of marketing at MIT, initially outlined this very well in his book, Don’t Just Relate—Advocate. Two other books, The Experience Economy and Authenticity, both by James Gilmore and B. Joseph Pine II, and a fourth book, Firms of Endearment, by marketing professors Jagdish Sheth, Raj Sisodia, and David Wolfe, did an even better job of explaining how organizations can create superior experiences and value for all stakeholders.
Particularly in Firms of Endearment, the authors identified elements of stakeholder relationship management (rather than a traditional stockholder and stock price-focused) model for creating a strategic and emotional bond between the enterprise and its customers. Importantly, they recognized that the “invention” of the World Wide Web (by British software engineer Tim Berners-Lee) in 1991 became a seminal, high-frequency communication enabler, also fundamentally changing the balance of decision-influencing and informational power to the B2C and B2B consuming masses. It also changed the form and amount of interaction between peers. Most critically as it impacts stakeholders, this has forced organizations to act with greater and greater openness and customer sensitivity.
Skepticism, information availability, and economic instability has combined to change the landscape of product and service decision-making, probably forever. As B2B and B2C consumers seek more meaning from everything—their work, their relationships, even the companies with which they do business, the result is that organizations will be perceived as partners to the degree with which they can align their products, services, values, and culture with the needs of stakeholders. Very few companies have been able to do this, either at creation or through transformation; however, those that have succeeded are true customer advocacy performance exemplars.
Sheth, Sisodia, and Wolfe call such organizations “humanistic” companies which seek to maximize their value to each group of stakeholders, not just to shareholders. These companies, which the authors refer to as “FoEs,” have succeeding in aligning (not just balancing) the interests of all stakeholders. They are focused on employee hiring, training and teamwork, and empower employees to optimize, and ‘humanize’, customer experiences. They work in partnership with suppliers.
The authors identified companies like Southwest Airlines—an organization with a 93 member Culture Committee, whose charter is to preserve Southwest’s leadership position among airline companies, and develop employee leaders on a local level who will live and share the culture with other employees, passengers and the public—as unique. As they state, right up front (Chapter 1, page 4):
‘What we call a humanistic company is run in such a way that its stakeholders—customers, employees, suppliers, business partners, society, and many investors—develop an emotional connection with it, an affectionate regard not unlike the way many people feel about their favorite sports teams. Humanistic companies—or firms of endearment (FoEs)—seek to maximize their value to society as a whole, not just to their shareholders. They are the ultimate value creators: They create emotional value, experiential value, social value, and of course, financial value. People who interact with such companies feel safe, secure, and pleased in their dealings. They enjoy working with or for the company, buying from it, investing in it, and having it as a neighbor.’
For the authors, a truly great company is one that makes the world a better place because it exists. Simple as that. In the book, which was published in 2007, the authors have identified about 30 companies, from multiple industries, that met their criteria. They included CarMax, BMW, Costco, Harley-Davidson, IKEA, JetBlue, Johnson & Johnson, New Balance, Patagonia, Timberland, Trader Joe’s, UPS, Wegmans—and Southwest Airlines. Had the book been written a bit later, it’s likely that Zappos would have made their list as well.
The authors compared financial performance of their selections with the 11 public companies identified by Jim Collins in Good to Great as superior in terms of investor return over an extended period of time. Here’s what they learned:
– Over a 10 year horizon, their selected companies outperformed the Good to Great companies by 1,028 percent to 331 percent (a 3.1 to 1 ratio)
Over five years, their selected companies outperformed the Good to Great companies by 128 percent to 77 percent (a 1.7 to 1 ratio)
– Just on the basis of comparison to the S & P 500, the public
companies singled out by Firms of Endearment returned 1,026 percent for investors over the 10 years ending June 30, 2006, compared to 122 percent for the S & P 500, more than an 8 to 1 ratio. Over 5 years, it was even higher—128 percent compared to 13 percent, about a 10 to 1 ratio.
How did they do it? By what magic did these companies achieve such stellar results? According to the authors, it begins with “emotionally intelligent” management, based on ideas offered in the 1995 and 1998 books by Daniel Coleman. This is principally the ability to be self-aware and self-regulating, emotionally and socially; a capability the authors recognize as being absent or ignored in most organizational cultures, even those that are otherwise fairly customer-centric. However, it is a necessary component of leadership development at all levels, and in all functions, of any company. Without it, the authors assert, the tone of the enterprise and its culture—how much people give and want to give, and how much they care about the enterprise and its stakeholders—will be impaired, yielding low morale and interpersonal consideration, and high levels of conflict and stress. The result is that business effectiveness, i.e. bottom-line outcomes, will suffer.
Also recognized is the power of communications, both inside and outside of the organization. As the authors state:
‘Instead of business-controlled monologues, the marketplace is now dominated by conversations. People talk to each other as never before about the companies they work for, buy from and invest in. This is forcing companies to operate with greater transparency. But that is not a problem for companies with nothing to hide, as firms of endearment have discovered. Transparency helps customers, employees, and other stakeholders develop trust in a company. It has proven to be effective as a motivating force among employees.’
Much of the creation of trust, per the authors, has to do with the employees who create differentiated customer experiences. The relevant point made is that, beginning with the hiring process, firms which create strong bonds with their customers select employees based both on skill set fit and also fit within the culture. L.L. Bean looks for employees who are dedicated outdoor types. Whole Foods and Trader Joe’s look for people who like dealing with food (and people) as a key part of their lives. Harley-Davidson looks for new staffers who are into motorcycles.”
So, at the end of the day, customer-centricity relies heavily on culture, people, and processes. It’s elegant, yet complex, chemistry for the creation of customer value.
I really am loving this discussion. I agree with your take, Bob, especially about the way it’s easy to see the overly negative when many customers are happy to provide public, positive feedback. I would question, however, if customer-centricity is a model or a philosophy. I have found that many entrepreneurs are customer-centric because they simply have to be. They are delivering a certain experience organically. It’s when additional people, layers, and processes are introduced that really start messing with that positive experience. If the leadership doesn’t instill a true value system around focusing on the customers, the model simply won’t follow.
Those who are implementing this model are the ones who actually care enough to do so. Customers will always look for the “what’s in it for me” first, because the very definition of customer means they are seeking some value for their investment. Organizations can do what they can to help them feel as valued as they should.
This whole discussion is thought-provoking. Great stuff.
An interesting post and some interesting points.
Pretty much every company today claims to be 'customer-centric'. Reality of course, is somewhat different. As Bain & Co research shows, although 80% of executives think their companies deliver a superior customer experience only 8% of customers agree. So what has gone wrong with customer-centricity?
Unfortinately, Dick's assumptions don't really help explain the difficulties.
Assumption 1: Customers are not looking for win-win relationships with companies.
I agree with you and Dick entirely. Most customers are not looking for win-win relationships with companies; the are just looking to win for themselves. And that's OK, because most companies are just looking to win for themselves as well. Companies may talk about developing win:win relationships with customers but in my experience, they rarely have much interest in finding out what customers really value in the first place.
Assumption 2: Most customers are not willing to play nice.
I agree with you entirely. Faced with serious service failure, customers have traditionally been limited to complaining to the company or simply defecting to another company. Voicing to others was not really an effective option. That has all changed. Customers now have a broad range of social media to voice to anyone interested and maybe even, to get recalcitrant companies to respond. Having said that, the social influence of customers is hugely overrated. Dave Carroll's 'United Breaks Guitars' hit on YouTube is way outside the capabilities of anything except a music professional. And Laurence Buchanan showed that it didn't move the market needle one little bit for United Airlines.
Assumption 3: Market segments are splintering into ‚universes of one'.
I agree with you entirely. There is little evidence that customer behaviour is fragmenting any more than it has always been fragmented. Most high-level segmentations based on demographics, are almost literally a waste of time. They don't look at what is important for customers, they can be interpreted in too many different ways and they don't lead to actionable changes by companies. More data and better analytics doesn't always result in improvements either. Not if companies are using them to ask the wrong questions. But used intelligently, it does offer the opportunity to create more meaningful segmentation. And it doesn't need to be individualised segments of one to be effective.
Assumption 4: Buyer's don't appreciate frequent seller contact.
Here I agree with Dick but not with you. There is no doubt that the level of spam received by customers has reached unprecedented levels. We are stranded on the tragedy of marketing commons, bombarded by messages that shout 'buy, Buy, BUY!!!”. And we have switched off as a result. What buyers do appreciate is what Tulli et al call 'relational support'. This means the right kind of contact (for the customer), providing the right kind of support (for the customer) at the right time (for the customer. This might include sales messages but more than often than not, it won't. It will mostly be contextual help, some of it before the sale, some of it after the coast, but the vast majority of it during the weeks, months, even years of usage long after the sale.
If Dick's assumptions don't really help explain why customer-centricity isn't working for companies or customers, what does? Perhaps it is the almost total lack of interest most companies have in their reluctant customers. Perhaps it is the overwhelming focus on everything up to the point of sale and nothing afterwards? Perhaps it is because customer-centricity as a business strategy isn't the most effective anyway? If only anyone really knew!
Delivering value to the customer implies that it is the company that does all the work and customers just get what the company, well, delivers. Recent research suggests that companies don’t actually deliver value per se, but instead provide the resources for customers to co-create value for themselves. Customers in return provide different resources for companies, typically in the form of money, knowledge and relationships. This exchange of resources is the heart of a working win:win relationship between a company and its customers.
I suggest the 250 year old emphasis on ‘delivering value’, on companies delivering stuff to customers, is as much a reason why customer-centricity is not working, indeed, why it can never really work.
Graham, the debate about “co-created value” is probably best left to another post. I find the concept interesting and useful in certain situations, but it really doesn’t explain why I bought a shovel that sits in my garage, unused.
That said, maybe “delivering value” isn’t the right way to express what’s happening, either.
What really matters is the customer’s perception. As a customer told me many years ago, “perception is reality.” If the customer perceives that it’s getting more/better value from company A instead of company B, company A will likely win. Substitute value for “job” getting done if you prefer.
Whether the value perceived/received is functional, emotional or social, the customer is the only one who can decide whether it’s worth providing value back to the company, normally in the form of a payment.
My view is that companies still have to “do” something that ends up being perceived as value by customers. I call that something “delivering value.” Certainly agree that in some situations some of the value requires the customer’s participation.
….tends to be selective, depending somewhat on the industry involved. There is evidence of some companies – Harley-Davidson, Legos, John Deere, and Daimler Chrysler come most immediately to mind – where proactively bringing in groups of customers and distributors have helped to shape new products and services. In addition to incorporating customers’ ideas, these companies make certain that customers and prospects are made aware that these resources were included in any product or service planning.
Interesting question. I suppose the answer is “yes” because a model is “a simplified representation or description of a system or complex entity, esp one designed to facilitate calculations and predictions.”
So I think it’s fair to say that “customer-centricity” is a model for how businesses should treat customers, and hopefully also how they make money doing so.
However, I’m not sure how much it helps this discussion to decide whether customer-centricity is a model, philosophy or for that matter, a strategy. These are all words subject to multiple interpretations. Defining one fuzzy concept using other fuzzy words didn’t help CRM — which some still proclaim is a business strategy and philosophy — did it? The market thinks CRM = tools, by and large.
Personally, I like to use ‘customer-centric’ as a modifier of business strategy: as in “customer-centric business strategy.” Maybe this is redundant for those (me included) that consider customer-centricity to include some profit-making outcome. But other use customer-centricity to just mean doing whatever the customer wants, without necessarily creating value for the enterprise.
Here is what we know and are seeing about the companies who continue to thrive:
– They treat their employees well. They honor them.
– These companies enable a workforce of heroes vs. forcing heroics – when folks have to arm wrestle lousy processes and policies
– They choose to believe in the importance of understanding customers’ lives – and use that to build products and services with these lives in mind.
– They work hard to not be cynics. Most businesses create the majority of the rules to protect themselves from the minority of the customers. These companies don’t.
– They are accountable. And they are deliberate. And they insist on creating an operating system of reliability for their customers.
The things noted above are about running an optimal and profitable business – based on delivering value to managing the asset that drives growth – customers.
If you look more closely you might find that value co-creation does explain why you bought the shovel that sits in your garage.
I assume that you had some kind of ‘job to be done’ for which you bought the shovel. It is likely to have been a functional job of digging your compact Californian garden. But it might have been an emotional job as you bought another shovel to add to your private shovel collection. Or maybe it was a relational job as you wanted to show your wife and son what a caring father you are as you set out to dig the garden. It might even have been a social job as your neighbours see what an fine upstanding member of the community you are as you tend your carefully planted garden. We all hire tools to help us do important jobs.
But the value you co-create from the shovel only comes during its usage. Unless you are into shovels, where ownership of teh shovel is of value to you, you only create value when you use the shovel. If it just sits in your garage unused, the shovel creates no value to you at all. We hire tools to do jobs, but we only create value if we actually use the tools for the jobs we hired them for.
And just as you have jobs to be done, so do all the actors in the supply chain that let up to thepoint of purchase. Obviously, their jobs are likely to be different to yours.
The key to suceeding in business once the economics for all businesses are roughly similar is in understanding what jobs customers are trying to so, what tools they currently hire to do them and how you can innovate better tools to help customers do important jobs better, faster and cheaper. This applies equally to shovels, to call ecentres and to social business.
Value co-creation is everywhere… you just need to know where to look.
As my 2009 article on How Customer Co-Creation is the Future of Business suggests, co-creation as crowdsourced co-design is only the starting point on a journey towards value co-creation. Adrian Payne and Penny Frow show in a their ANZMAC article on Co-creation: A Typology and Conceptial Framework, that there are multiple different stages on this journey.
Ultimately, value co-creation provides a robust framework grounded in service dominant logic that enables companies to rethink how they can co-create profitable value, one touchpoint at a time, together with their customers.
Thanks, Graham. I need to read more about co-creation and think about it. Thanks for you comments and the link to co-creation paper.
Certainly agree it’s an important idea. I’ve advocated “collaborative” relationships with customers for 10 years (more than just communications a la social).
Yes of course there is value created in use, but also value when something may be used. Like an insurance policy. Or the shovel in my garage.
I don’t know if the concept of “latent value” is part of the co-creation idea, but I think we buy lots of things that don’t get used. And yet we still think they are valuable. Value is just a perception in our minds, no?
If value doesn’t come exclusively from usage, then where does it come from? And what does “usage” really mean?
Usage is a flexible concept. It depnds upon your situation, the job you hired a tool to do and the outcome you desire from using it. To remain with the shovel analogy, if you had hired the shovel to do a functional digging job, you only achieve your desired outcome when you use it to dig the garden. Until you use the shovel for digging it is a just an inexpensive value proposition waiting to be used. Ditto for the relational and social jobs. This is similar to your proposal for latent value. On the other hand, if you hired the shovel to do an emotional collectable job then just owning the shovel would create value for you.
In other words, usage depends up on the job you hired the tool to do and the outcome you desired from doing so.
Insurance is a more complicated service version of the shovel. Most people buy insurance for the psychological security of knowing they are insured should anything untoward happen. This is an emotional and to a certain extent, a relational job. Heaven forbid that anything untoward does happen, because as everyone knows, getting insurers to pay out on their policies is more difficult than getting blood out of a stone. Owning an insurance policy thus creates value for the insured by delivering security outcomes. It also provides a value proposition if something untoward actually happens.
PS. I will email you with a few core value co-creation papers to get you started.
It sounds really great. But, do you have any hard financial evidence that such things actually deliver superior profits for companies adopting them, over and above controlled competing strategies.
We have seen many other equally great lists of corporate characteristics held up to the light only for them to fail miserably when they were: from Peters & Waterman’s ‘In Search of Excellence’, to Collins ‘From Good to Great’, to Reichelds’s ‘Loyalty Effect’. They all suffered from the post hoc ergo propter hoc fallacy, largely due to inadequate research.
If only life was as easy as creating a list!
There’s a fascinating discussion going on at Dick Lee’s LinkedIn discussion group: Building the Customer-Centric Organization. 100+ comments were generated by Dick’s simple question: should the name of the group be changed?
You’ll find a lot of contrasting ideas about what exactly does it means to be “customer-centric” vs. “customer-focused.” Some think they are the same, others see a difference.
And plenty of conversation about “relationships” too. Is a business/customer relationship defined by the amount of customer communication. Or can a consumer have a strong relationship with a brand with little/no communication?
Another interesting debate is whether companies selling commodities have a relationship or are being customer-centric.
I’ve learned a lot from engaging with this group. When you’ve got some time, join the conversation here.
Hi everyone, I have been in marketing for almost 20 years but because I have spent the last 7 years buried in P.O.P. advertising, I am finding myself having to familiarize myself with many new aspects of marketing.
I read both and quite frankly, coming back to the rest of the marketing mix was both head spinning and the same old thing
First off, I read the comments and this is where I found it "interesting”. We lose ourselves. All this refined talk, buzz words, new techniques… all of it sounds like corporate poetry. Customer Centricity has been around for years, only somebody somewhere coined the phrase after tweaking the concept a little. Quite frankly, is customer centricity going to die? I don't think so. I don't think it is going to die anymore than one might claim it was born a child of marketing. It was around long before marketing existed. The essence of commerce was built on some sort of centricity. No one ever made a dollar by not giving a damn, except for criminals. If you go into business tomorrow you need to be able to do the flowing; deliver quality work, on time, on budget and by your own definition of customer centricity. If you can't answer to these 4 basic business survival skills then go punch a timecard in a factory.
Questioning if customer centricity should be common practice in a company is as ridiculous as saying, "I'm a good citizen, I have never been to jail” You're NOT supposed to go to jail. So please, customer centricity is just a pretty word for considering your client in everything you do and how YOU see fit. Do you think Apple is customer centric…? They are almost the opposite in so many ways. The only think they care about is wowing us with technology, but sincerely, they have us eating in the palm of their hand. Which reminds me; I need to take an appointment with one of their "genius” to fix the operating system on my iphone, if I simply show up at their store, they'll turn me away.
But since we're on the topic of customer centricity, let's see how the rest of us (Apple aside) should view it. What jumped out in all the discussion for me is how customer centricity at consumer and B2B levels seemed interchangeable. CPG manufacturers have two clients; retailers and the end users; consumers. There should be (because there is) a clear distinction between customer centricity (B2B) and consumer centricity; two different practices, two different philosophies.
Second, the problem with social media is similar to HR problems regarding communication. Any HR manager will tell you that there are two forms of communication within a company, the first one is formal (an email from 1 colleague to another on a project, a Presidential meeting with staff, a communiquÉ regarding vacation pay, etc.) This communication is controlled and disciplined. The other form of communication is informal communication, (Sue and Tom by the coffee machine, talking about how the new procedure is a waste of time, or the fact that the new manager is a real ass). The latter one is the problem, because companies can't control it.
So, think of ATL advertising as formal communication then think of the social media as the coffee machine… Same thing! How do you, as a company, manage acid tongues and bad mouths? You appeal to them, you win them over, you suck up to them. They are the hipsters of the world, the opinion leaders, they're the alpha male of the group and until you get on their good side, they're a problem.
So if you want consumer centricity to work, seek and befriend the bad seeds. If you are a cosmetic company, befriend cosmetic bloggers, send samples and talk to them. Literally, pick up the phone and talk to them, make them visit your plant… They are Generals waiting to build you an army of loyal consumers. Address the girl on FB who complained about your product. Mc Donald's does it. Social media is home to opinion leaders and wolf pack chiefs so look for them and make sure they're on your good side. Win over the hipsters with their attitude, their flair for the next cool thing and their opinion for everything. Don't worry so much about the "play nice” crowd, you won them over a long time ago -but don’t take them for granted.
Customer centricity will never die because it is a must in the foundation of business –as it always was. The new thing, the next buzz word, the next “should be” I think, is… "opinion-leader-centricity”. Food for thought!
You should not be in hospitality if you do not want to be a server…that means managers… housekeepers…all the players in the game!
I love to serve people…
I love to give…
I love to be the one to change a person from being angry…to turning to me with a smile.
I love hospitality…
It is not a game or a job to me…
I am so totally disappointed that I have to work through a pile of people who are trying to sell… in order to get to a place where I can ‘serve’!
From the beginning of my ‘going to work’… I loved to ‘got to work’. I escaped my home life and went to my job! I loved to do a good job! What happened to that idea? If you do a good job …serve people… what is more ?? …
Maybe that is next…
Just serve if you are a server…
Just give your best…
And continue …
Some people will return …some will not …
But everyone will be happier in the long run…
Stripping back the reason for the widespread emergence of customer focus & what do you have? Tighter margins, growth forecast adherence pressure or adapting to a changing landscape of heightened competition..the entire concept is purely another strategy to secure market positioning.
Here are my problems:
<1% focused on the actual people who will have direct contact with your customers? Treat people the way you expect to be treated!
Customer satisfaction is paramount? Are you running a charity? Customers are the vehicle to organisational success.....why pretend you care when it derives self promotion? Do you care otherwise?
Customer centricity starts with employee centricity - fundamentally it begins in the absence of profit base economies & inequality. Not in the real world? The entire human existence has only met with inequality in the past 5-10k years. It isn't innate but learned.....for intelligent beings please think about more than your existence, starting with the world our kids are going to grow up in......you are wise enough, but are you selfless enough!! The current path only ends in one place.....
I find this to be a very interesting article and thread of comments. You said it best in the beginning of your test, that there are a wide variety of definitions of Customer Centricity, so it is understandable that there would be disagreements.
That being said, I largely agree with all of your points.
I will state first my overall thoughts on what Customer Centricity, so as others can put my comments into context.
To me Customer Centricity is a corporate philosophy. It is a choice to look at a retail business through an entirely different lens. It is not about Product as a core asset (and the need to find the right customers for those products), but looking at Customers as the core asset (and finding or developing the right products and services for those customer). As such, my need to understand each customer on an individual basis is critical, so I can truly personalize each engagement.
Saying Customer Centricty is dead reminds me of conversations years ago about CRM. Clearly CRM is still here. The main difference, however, is that I believe CRM to be a strategy, while Customer Centricity to be a philosophy. Which strategy a retailer wishes to use in order to live the Customer Centricty philosophy is dependent on the retail organization. It may be through CRM, CEM, Clienteling, or other related mechanisms. It is in all instances, however, a prerequisite to better know and understand your customer as an individual, not an aggregate.
So my thoughts on your article
1. Win/win is not a customer strategy, but a retailer strategy. Those that fail to provide a win for the customer have few sales, and those who fail to provide a win for the business exit the marketplace.
2. While customers may be a bit more quick to leave an retailer, and with Social Media word may spread more quickly, the reality is the same as before. If you address an issue quickly, and to the customer’s satisfaction – these customers are often more loyal than those who never had an issue in the first place. retailers simply need to be more attuned to the Social aspect of complaints and address them in that forum as well.
3. Analytics are only now getting us to the dream of knowing each customer on a personal level. We are largely still in the infancy of the potential here. True 1:1 marketing is indeed a future possibility, but aside from the store associate standing in front of the customer, it has until now not been a possibility.
4. Tied very much to the point above, experience with the many deployments of customer-centric solutions in which I have been involved, customers are absolutely delighted with frequent communications. they do, however, need to be personalized, and derived from a relationship. Without question the most successful are from a store associate themselves.
Customer-centricity is not a new idea. It’s interesting, though, that despite the fact that it’s as old as business, companies still struggle.
In my research I found 50% stuck at stage 1 — viewing customers as targets. I don’t personally consider this to be very customer-centric (and customers don’t, either) but many do. It’s the “CRM” thinking that being customer-centric means maximizing profits per customer.
You have to start somewhere, I suppose, but progressive companies focus more on value delivery, which is a never-ending quest.
This thread is a microcosm for umpteen meetings I have been in over 32 years of work in telecoms. Gaining enterprise wide behaviour that reflects what your company means by the words you choose to use is the real challenge. The most direct route for getting there is to craft enterprise strategy that explicitly describes the way in which your business will serve customers. Benefit of doing so is that the strategies, programs and projects you undertake, in addition to bau, are anchored in the company financials, regulatory and legal constraints, environmental and social considerations and economic realities. As part of team based strategy development, the company takes account of the resources required to execute, debates the optimal way to organize to deliver and has a full and frank discussion about the culture (current or desired) needed to support strategic goals and initiatives. Best of all, no function, department , line of business , role or individual is exempt. Then and only then can you claim to have a business model that puts customers first .Ultimately,the only qualified arbiter of customer centricity/focus/orientation ..or whatever word reflects the zeitgeist of the day is your customer.
PS. In all those years of talking to customers, I have never heard anyone express their devotion or contempt for a company using those words.
Thanks , Lynn! I almost left out the word “behaviour” but thought the better of it for precisely the reasons you articulate. In the end , it is only behaviour that matters, although the dialogue that goes on before and during a shift to customers first culture is pretty important. The single biggest mistake or failing firms fall prey to is limiting the scope of customer first behaviour to the usual suspects: Marketing, Sales, Service. Wrong, wrong , wrong. Everyone means everyone, each in accordance with the role they play in the firm. The 2 biggest customer experience preventionist functions are Finance and IT, with honourable mention going to procurement. Why? The goals and objectives for those functions are spectactularly disconnected from customer outcomes, which surely must emanate from some serious translation problems from strategic goals to personal scorecards. Once you let anyone off the hook, the whole thing starts to unravel, as witnessed by the very healthy Customer Experience consulting numbers. Apparently it takes 7 times to quit smoking: I think it takes at least that to quit uncustomer-centric behaviours. Is this tough to do? Yes. Is it impossible? No. Like smoking , you cannot selectively quit, without risk of relapse. Not a perfect analogy as parts of ones body cannot continue smoking independently, like functions can continue to behave un customer – centric in firms.
Good points, Carol — it’s about “enterprise wide behaviour that reflects what your company means by the words you choose to use is the real challenge” — translated to “walking the talk”.
But what is meant by “the talk”? Usually we think of executives’ internal comments and claims about the importance of customers. Yes, it’s that, but even more importantly, “the talk” is what customers come to expect due to your ads, sales reps and service reps’ comments, messaging at customer touch-points, awards you win, etc. Collectively, this talk = your brand promise. It’s what customers perceive that their experience will comprise.
So what’s “the walk”? Usually we think of product/service features/quality, when it comes to messaging to external customers, and we think of the customer contact center agents when it comes to executives’ messaging internally. Here’s where delusions of customer-centricity break down. It’s a mis-match of who/what/where/when/how “the walk” must happen. The walk = every single person in the company understanding and managing their role within the customer experience context. (= LIVING the brand promise, through-and-through.) Unless this is your mantra, there will always be big gaps between your brand promise and what you get, and how you think you’re customer-centric, and your customers’ disagreement with that.
I like the way you put it, Carol, in your recent blog post, Putting Customers First: If Not You, Who?. Just last week I presented recommendations to a Customer Care team, and although they specifically asked me to help them see things from their customers’ viewpoint, they continually responded with the typical managerial-hat reasons why the status quo is prevailing, and it took a bit of prodding to get them to adopt the customers’ view. Thus, even those of us who are champions for the customer need to be sure we’re really grasping what they see/want. Thanks for your insights.
Many of the recent posts in this dialogue seem to suggest that more customer-centricity (the definition of customer-centricity is irrelevant for this post) is better than less customer-centricity. But is that really so? Actually, I don’t think so.
The reason is simply commercial logic. If a company is completely self-centric it is likely that customers will not enter much into its commercial equations. Customers will likely get a rotten deal at the expense of shareholders (I will limit this post to just the consideration of shareholders and customers’ interests to keep things simple). This may work for a whlie but it is likely that the company will not prosper in a competitive market because its commercial equations don’t add up to a viable business model. There’s not enough in it for customers looking for decent products, prices and service. And companies do need customers, or at least their money.
The opposite extreme is equally problematic. If a company is completely customer-centric it is likely that customers will dominate its commercial equations. Customers will likely get a fantastic deal at the expense of shareholders. The ultimate deal would be to give away the company’s products for free. This may also work for a while but it is likely that the company will not prosper because its commercial equations also don’t add up to a viable business model. There’s not enough in it for shareholders looking for a decent return. And companies need shareholders’ money too.
If the self-centric and customer-centric extremes are not commercially viable, the $64,000 question is exactly how much customer-centricity creates the most value for the company whilst at the same time delivering enough value for the customer to create a temporary competitive advantage (there is no such thing as a sustained competitive advantage any more)? And there is a related question too. If the company has some other magic commercial ingredient, such as a quasi-monopoly, a stranglehold patent or some other overwhelming advantage, why should it bother to be customer-centric at all?
Beyond fluffy aphorisms like the purpose of a company is to create a satisfied customer (apologies to the late, great Peter Drucker) exactly how customer-centric should companies be? This is a far more valuable question to answer than any amount of waffle about delivering the brand.
You pose an interesting question related to the validity of the approach for all businesses, and I would have to agree that is may not be valid in certain situations.
I do take exception to the comment that the ultimate deal would be to give away free products. I think you focus far too much on price, where Customer Centricity exists to provide value to a customer for something other that price; namely service. There are a variety of factors in the Value Equation, price being only one of them.
In my many years of deploying Customer-centric solution in retail (mostly Clienteling) margins most typically go up, not down. The reason for this is that the business is focusing on an individual customer, and finding the best products for that customer (usually new products not on sale). rather than focusing on finding a group of customers who might buy an existing product (quite often when it is on sale).
So are there examples where Customer Centricity is not relevant? Sure, in the case of a unique product with a patent as you describe, or a retailer focusing in a low service price competitive market segment such as Wal-Mart, a Customer-centric approach may be of less value (although I would argue certainly not of no value). This may also be true for the business that has a one-time sale, as share of wallet and repeat business is not the primary business model (although these one-time customers may be fertile ground for referrals).
For the typical retail business, however, capturing the mid-share of the individual customer, and making the most of each individual engagement through personalization is highly relevant to providing customer value.
Thanks for your thoughtful comment. And the equally thoughtful commentary over at your 'Thoughts for Retail' blog.
I agree with you about pricing in general. Pricing is but one of a number of elements in the marketing mix. I used it as a proxy for all of them to illustrate a point. The point remains valid in spite of that; the best option for the customer is still where they get all that they value at no financial cost to them. This is a charitable, short-term strategy for a company at best. Even a company like Ryanair whose CEO has said that he would like to offer core flights for free, still expects to make up for the loss in revenue from the myriad of ancillary charges associated with flying with a low-cost airline.
I don’t agree with you that “customer-centricity exists to provide value to a customer for something other that price; namely service”. The statement has three obvious problems. Firstly, a customer uses simple mental accounting to compare the price and other costs of a product against its expected value to decide whether it is worth buying. As price is a powerful signalling mechanism the customer would be foolish to ignore it. So would a company wishing to serve the customer.
Secondly, as Vargo & Lusch has shown, a product is in effect nothing more than a vehicle for enabling a service for a customer. When the customer uses the product the resources embedded in it enable the customer to create the value they expect from using it. That is why they paid for it after all. Until the customer uses the product it is just a value proposition. The same goes for post-sale customer service embedded in a product.
Finally, customer-centricity is about much more than just providing service. As I made clear in a 2008 blog post on How Customer-Centricity Drives profits it is also about understanding what customers need, providing mass-customised products so that they can get exactly the right one to match their needs, delivering them through lean, dynamic systems, and of course, managing the trade-offs inherent in these to optimise the value of customers. Customer-centricity is inextricably linked with price.
Whilst I believe the anecdotal stories gathered over your 25 years of retailing, I suspect that the increased margins you report from providing increased customer service to customers would start to decrease beyond a certain level. Providing service is not free for a company, even though it may not be explicitly priced as an option for the customer to purchase (but it should be priced into the bundled product price). As I suggested in my post, the key question is not how can a company provide more service, but what is the optimal level of service to provide. The moment the incremental revenue from an additional US$ spent on providing it falls below 1 US$, the sooner the company should stop larding on additional, unprofitable service.
In my experience most companies have no idea what their service costs, let alone the incremental revenue it creates or the elasticity between the two. And they go on adding too much additional service, or more likely, providing too little basic service to achieve the service profitability sweet spot.
My point was not that a company should not be customer-centric, but that it should work out the optimum level of customer-centricity with all that entails. The point is just as salient as when I write it all those hours ago.
Thank you for your follow-up, and your well-articulated response.
I do in fact agree with the broader ideas detailed in your latest comment. Without a doubt price is inextricably linked to Customer Centricity, as it is inextricably linked to Value. Value is a product of benefits minus price. If the benefits outweigh the price of a good or service, then the item has fair value. Equally, if someone provides all of the same benefits for a lower price, then the competitor's products or services have greater value.
In very simple terms, there are two ways to increase value to a customer – one is to lower the price (a strategy that has become ingrained in most businesses strategy), and the other is to increase benefits. Benefits come in many forms, service being only one of them. I apologize if my comment appeared as though I focused exclusively on service as an response to price, as I personally believe Customer Centricity is not about service (although it is an element), but more about things such as convenience, relevance, and the ability to fill a customer's needs for products or services they really desire. I couldn’t agree more that mass-customization is a logical extension to a true Customer-centric organization.
I also agree that there is an inevitable cost/benefit equation that dictates the amount a company will spend on providing customer service, products or services (again oversimplifying, as there are myriad factors which can be perceived as benefits to a customer), and there is undeniably a balance to be struck by each business relative to that incremental spend.
In the greater scheme of things, and more to the point of the initial post, I think Customer Centricity is far from dead. With the benefits of Big Data, Mass Customization, and a host of other technological, system, and supply chain advancements over the last decades, Customer Centricity is in a nascent stage of life. Is there a balance? Absolutely. Does it apply to all businesses? Probably not. For those where it does apply, can it apply to all customers? No, as you still need customer acquisition, and there are subsets of customers where the added cost of providing a product or service may not justify the expense.
So all in all, we are probably much more in agreement than disagreement. My only concern is the conversation (not highlighting your comment) often comes down to that of Price, and not Value. My hope is that more organizations continue to look at ways to increase value through providing better, personalized benefits (in all forms) to a customer, rather than focusing exclusively on Price.
Graham , Scott
Seems to me we are back at the definitional stage as I agree with both of you. Pricing and transparency is certainly a component of overall customer experience but so are products and services, brand and reputation as well as contact experience. Conventional business school think is that contact experience is the whole shebang a cost to be managed as opposed to being leveraged to best advantage to both buyer and seller.
The argument that customers want flawless products for free is not new and research abounds concluding that they will pay for quality in product and service. Quality is contextual and not the same for every kind of purchase in every kind of geography. The Ryan Air model works because of the liberalization of European air travel and access to secondary and tertiary airports which changed the cost structure dramatically and made air travel accessible for new customer segments. Customer experience in that context is safe and timely arrival and access to comforts should you need them. Comforts are not so important on short haul, but very much so on long haul, which RA doesn’t offer.Business people need more of that and flexibility and pay accordingly, but when they travel with family on their own dime, expectations are lower. As long a Ryan Air delivers to those expectations, well then they are customer centric. Rough around the edges? Yes, but I suspect Michael O’Leary knows how to get lots of publicity by being cheeky, because the experience really isn’t bad.
The trouble begins when there’s a difference between what people say they will do and what they actually do and companies are no exception. Given that trust in business and government is diminishing , those that do what they say they will do, when they say they will do it , for the price they said they’d do it for stand out. The worst turn of events in the struggle to convince those not directly involved in customer experience was when those of us that are failed to quash the notion that customer centricity costs more. It does not, if tackled properly and by that I mean catching the failures between functions that drive lousy customer outcomes and way too much money to rescue them.
I am a recovering monopolist which has to be the very best training ever to understand what it takes and why it should be taken to put customers first. Customers broke land speed records leaving the telcos when competition was introduced and having witnessed the consequences from roles in sales, marketing and service , I am firmly and utterly convinced that no one is ultimately exempt from being customer centric.
In the whirlwind that is technological advancement , we don’t seem to have made much headway in customer approval ratings, despite a blizzard of self reporting that says otherwise.Thus the basics of meaningful exchange between buyer and sellers still comes down to mutual benefit, not charity and not monopoly. The only thing I know for sure is that businesses will always have customers, where you operate a landfill or an exclusive boutique hotel or sell business solutions. If we cannot parlay that into a profitable and useful business, then shame on us
Thanks for your thoughtful replies.
I think we are in danger of agreeing on the underlying principles, (despite coming from two nations separated by the same language).
In my experience most companies neither know, nor have much interest in finding out what customers need and want. They are too busy trying to sell them the stuff they already have made. Customers have grown weary of being bombarded by messages that are utterly irrelevant. The result is that marketers have created a tragedy of the marketing commons with each shouting “buy my stuff” louder than the other, depsite customers often having vacated the area some time earlier. And the commons is surrounded by a service desert where customers vainly try to contact the companies to get help with the products they bought only to be met by a labyrinthine IVR tree leading nowhere. They would be better off ringing the Samaritans!
Thought leaders like Dutch insurer OHRA’s Wim Rampen have shown there is a better way. It starts with developing a thorough understanding of the jobs customrs are trying tp do and the tools, technologies and touchpoints they hire to help do them better. Armed with this essential insight and a knowledge of their own capabilites and how they create economic value, companies can create an ‘experience platform’ that helps customers create value over their end-to-end lifecycle by giving them better ways to do their jobs, whilst earning more value for shareholders at the same time.
This doesn’t mean throwing away current business models, but it does mean taking a long, hard look at how efficient, effective and thus productive they are at co-creating value for customers as well as themselves.
There are a whole host of tools from Vargo & Lusch’s work on service-dominant logic, through Irene Ng’s work on value creating systems, Christensen & Ulwick’s work on jobs-to-be-done, Lanning & Michaels’ work on customer value propositions, all the way to open source service design tools. If only companies could think a little more out of the box.
Graham, thanks to adding to an interesting discussion.
You position customer-centricity as giving customers what they want. That’s how customers see it, for sure. And you can take every good idea to an extreme — in this case companies could give away their stuff for free and be loved by their customers right up to the day they went out of business!
Of course, the other extreme is to take from customers until they can give no more, and leave for green pastures. A few companies might get away with this for a time, thanks to a monopoly position, but it’s not a sustainable strategy either.
Fortunately, there is a middle ground, practiced by companies like Amazon, Intuit, Southwest, and USAA.
Believe it or not, one common definition of customer-centricity is what you’ve described: Companies “trying to sell them the stuff they already have made.” Targeted marketing and sales automation — both commonly associated with “CRM,” are the methods used. Great for technology sales, but not what customer think of as customer-centric.
The good news is that companies that really do listen to, and are about customers; think about “jobs to be done” and innovate to satisfy unmet customer needs will stand out from their competitors.
It’s easy to criticize companies for not “getting” customer-centricity and making mistakes. How about let’s all mention a few that have found a successful middle way — delivering more value for customers that eventually drives more value to the company and its stakeholders?
I wonder. Is being customer-centric enough to make a company into an standout example or good corporate citizenship as you suggest. Or do companies have larger obligations than just those to shareholders and customers? More specifically, do companies have a moral obligation to threat their staff as fairly as we obviously believe they should treat their customers.
Amazon is a case in point. There have been many articles describing the appalling way in which Amazon treats its warehouse staff. The Morning Call, a local PA newspaper, documented how Amazon made its staff work in excessive temperatures (114 degrees F, 46 degrees C) in its unventilated warehouses (http://bit.ly/vHKYxz). The Financial Times documented how Amazon punished its staff for falling ill (http://on.ft.com/XVTYgM). Reuters documented a lawsuit that Amazon is facing for allegedly shorting staff on overtime pay(http://reut.rs/ee7Eei). And Business Week documented how an expose by German TV channel ARD (http://bit.ly/X6LIgb video in German) found that it housed temporary staff seven to a hut in an abandoned resort in Germany (http://buswk.co/Ze9i9P). And there are many, many more articles in reputable newspapers documenting what seemes to be the systematic exploitation of staff by Amazon.
This litany of what can only be described as abusive behaviour towards staff by Amazon casts a dark shadow over any claim it may have to be customer-centric. How could any half-decent customer feel morally righteous knowing that the book they purchased from Amazon was delivered through a system seemingly designed to explioit the the weak bargaining position of the poorest members of staff.
Perhaps there is more to business than just serving shareholders and customers. Perhaps companies have a moral responsibility to treat staff with the dignity that we all expect, as customers, to be treated with. As Michael Sandel points out in his recent book on the ‘What Money Can’t Buy: The Moral Limits of Markets (http://bit.ly/PkTVtw), there is more to business life than just competing in free markets. Or at least there should.
What do you think? Does Amazons abusive attitude towards its staff morally repel any notion that it could ever be customer-centric?
Companies need to do lots of things well to succeed. Including managing costs, controlling risk, complying with regulations… and yes, treating employees and contractors well too.
Some of these may link to customer-centricity, and my research suggests that employee engagement/empowerment is one of them. A company that abuses its staff can hardly expect them to treat customers well.
That said, I had not heard that Amazon had a problem in this area. If so, it could eventually undermine their success. We’ll have to see how Bezos deals with it.
I hear your sentiment. But I am not sure that anything is going to change at Amazon. Except perhaps through overt political or public pressure.
Amazon is a thoroughly digital company. It provides a multi-sided software platform over which thousands of vendors (in addition to Amazon itself) and millions of customers can do business. Vendors and customers who would not normally do business with each other. It makes money on its own singe-sided sales, and from the haircut on vendors’s sales and a broad range of ancillary services. (Let’s leave Amazon’s cloud data management business out of this.)
In Amazon’s digital world the costs of business are largely driven by the costs of the bits & bytes used to manage the software platform, rather than by the costs of the atoms & molucules as in a traditional analogue business. Amazon’s warehousing operation is probably the only significant part of its business where the costs of atoms & moluecules loom large as an input to its operating expenses. I am pretty sure Amazon would fully automate its warehouses if only machinery was as adaptable as humans are.
Amazon seems to have willfully created a warehousing operation where staff are treated as labour costs to be minimised rather than productive human resources to be maximised. It would appear to have taken the digital markets model to its limit, whilst leaving its associated moral obligations to its analogue warehousing staff far behind.
Maslow was right. If the only hammer Amazon has is a cost reduction one, we should not be surprised if Amazon beats its warehousing staff over their heads with it (metaphorically speaking).
I do hope that other readers will chip in with their opinions. The issue of markets vs. morals is far more important in the larger scale of things than customer-centricity ever will be.
With your background in the Lean world, you know that one of the key principles is to show your employees (people) respect. For instance, instead of casting blame, you would ask “what is it about the system that allowed an error to happen?” and other such stuff. What I find interesting is that Amazon seems to be a very systemized organization, yet it doesn’t appear to have this important characteristic of a lean organization (do they measure the system, or the employees?). Most likely, this is because Bezos is the system. Not that Lean is everything, but it is certainly focused on the customer more than a Taylorist-embracing company. Is Bezos really that smart?
I don’t believe Amazon is customer-centric, for that very reason. The obvious de-motivation of his workers (they are being managed, not the system so much?) will not serve Amazon well in the long run. The public scrutiny will bring pressure down upon the company (right or wrong). However, I don’t believe in political intervention either (there are plenty of workers rights laws in place). Politicians are notorious for being loud and putting the wrong measures in place, and we all know how that impacts motivations; things get gamed and little good comes from it.
Just wanted to throw that in; I’m not commenting on the entire thread. Although, I do agree with you that more companies should be using the current/new tools and frameworks at their disposal and stop simply selling what they make. In the end, we will still only see 5% or so sustain their competitive advantage (period) while the rest will be introduced to a stall point.
My random and disorganized thought for the day.
Go get a free WordPress blog and start writing so I have something interesting to read! 🙂
If Amazon’s human resources practices are poor, then customers and the media can pressure the company to change. That’s what happened to Apple.
For Amazon, I’m struggling to find any references of the abuses you suggest. Can you point me to an article or research?
Current Glassdoor reviews give Amazon.com an overall “OK” rating of 3.3, with the most room for improvement in “work/life balance.” I’ve heard from ex-Amazon people that it’s an intense place to work.
On Glassdoor, Bezos has an 87% approval rating and “65% of employees recommend this company to a friend.”
Recent awards include “Top 10 Most Reputable Companies” by Forbes in 2013 and “Top 50 Most Admired Companies” by Fortune in 2012.
I’m not saying Bezos is a paragon of virtue in how he manages the company. Still, I’m also not seeing much to suggest that he is treating his workforce poorly.
Low cost doesn’t have to translate into poor treatment. Southwest gets high marks for employee engagement, for example.
I included newspaper articles about Amazon’s mistreatment of its workers in an earlier comment. Here are the newspaper stories again. They are from The Morning Call, the London Financial Times, Business Week and German national news channel ARD. There are plenty more stories from reputable newspapers out there if you look.
“Amazon is a case in point. There have been many articles describing the appalling way in which Amazon treats its warehouse staff. The Morning Call, a local PA newspaper, documented how Amazon made its staff work in excessive temperatures (114 degrees F, 46 degrees C) in its unventilated warehouses (http://bit.ly/vHKYxz). The Financial Times documented how Amazon punished its staff for falling ill (http://on.ft.com/XVTYgM). Reuters documented a lawsuit that Amazon is facing for allegedly shorting staff on overtime pay(http://reut.rs/ee7Eei). And Business Week documented how an expose by German TV channel ARD (http://bit.ly/X6LIgb video in German) found that it housed temporary staff seven to a hut in an abandoned resort in Germany (http://buswk.co/Ze9i9P). And there are many, many more articles in reputable newspapers documenting what seemes to be the systematic exploitation of staff by Amazon.”
I wouldn’t take too much account of a handful of ex-employee reviews and a few awards. These are both relatively easy to manipulate and you are always in danger of falling into the consequentialist utilitarian trap in moral philosophy. There are plenty of bona fide reports showing where, when and how Amazon mistreats its staff. If it is fundamentally wrong to mistreat your staff, it is wrong whether they accept it or not. It has been for almost 2,000 years!
I believe a great way to sum this up is:
Make exactly what a “win” for our company is to be exactly equal to what a “win” for our customer is.