By Shaun Smith and Andy Milligan
What matters most to customers
Many readers will be very familiar with Abraham Maslow’s Hierarchy of Needs – something that is particularly relevant at present because it helps explain how customers are reacting to the current coronavirus crisis.
The first three basic needs are those essential to life and we’ve seen plenty of examples of customers valuing these:
- Physical: The need for food – people have been hoarding staples like flour and pasta.
- Security: The need to protect oneself from harm – consumers have been bulk buying face masks, toilet paper, and hand sanitiser.
- Social: The need to connect with others – witness the huge take-up of Zoom.
Maslow argued that only when basic needs are met are we motivated by the higher-order needs. Some might question whether these are currently motivating people.
- Ego: The need for status and recognition – buying luxury fashion items, for example, sales of which have plummeted.
- Self-actualisation: The need to fulfil one’s potential – but is there much appetite for personal growth if you are worried about paying the mortgage?
So, if the coronavirus has focused customers’ attention on meeting basic needs, is customer experience (focusing as it does on those higher-order needs by providing psychological as well as physical benefits)relevant anymore?
Well, there’s plenty of evidence to show that customers are still looking for something beyond their basic needs. It’s just that those higher-order needs are subtly changing. And what customers are increasingly looking for are companies who show a concern for something more meaningful than their cashflow.
- Sports Direct. Mike Ashley, the CEO of the leisurewear retailer Sports Direct, argued that his stores should stay open to help the UK keep fit. He then hiked the price of gym equipment by 50%. Needless to say, consumers were not impressed, and he was soon making a public apology.
- JD Wetherspoons. Tim Martin, the CEO of JD Wetherspoons, wanted his 874 pubs to stay open because ‘there was hardly any risk to the public’. When legally obliged to close, he laid off all his staff without pay and told them to get a job at Tesco.
- Tesco, on the other hand, gave all its staff a 10% bonus for the extra work they are putting in and is focusing on deliveries to its vulnerable customers. As Tesco’s brand promise says: ‘Every Little Helps’.
So, some very different company actions, but how will customers respond? It is hard to predict the future, but we can let history be our guide.
In October 2012, the United States was hit by the largest storm on record, Hurricane Sandy. It raged for 48 hours and in that time 85 people lost their lives and 8 million were left without power. Some brands saw this as a sales opportunity. American Apparel, for example, targeted customers in the nine stricken states with an advertisement saying ‘In case you’re bored in the storm, 20% off for the next 36 hours’. Consumers reacted with anger at this commercialisation of a crisis and social media channels were buzzing with outrage.
Contrast that with two other brands:
- Tide, the washing powder manufacturer, loaded up a truck with 32 washer-dryers so that people could clean their clothes.
- Duracell, the battery manufacturer sent mobile charging stations to Lower Manhattan so people could recharge their phones and call their loved ones.
American Apparel acted as if it was motivated by short-term profit, whereas the other two brands acted as if they were driven by a desire to help people. Tide and Duracell are both brands of Procter and Gamble. P&G’s purpose is “To touch and improve more consumers’ lives with more P&G brands and products every day” and in the crisis of Hurricane Sandy they acted on that purpose. After the storm, American Apparel lost market share and eventually went into Chapter 11 administration, whereas P&G saw its market share increase. In fact, P&G has always done well in tough times, because, rather than cut costs, which is the typical knee-jerk reaction of brands to a downturn, its leaders choose instead to invest in their brands and their customers.
How do strong brands perform in a crisis?
WPP/Kantor conducts worldwide research every year into the 100 strongest brands, measuring their performance against the general market.
As you can see from this graph, the strong brands shown on the chart (in blue) produce market returns significantly higher than the market overall. The interesting thing to note is that during the financial crisis of 2008/9, while all brands declined, the strong brands bounced back much more rapidly. P&G is one of those brands; it has historically performed very well in downturns because consumers want to deal with strong brands that they know, trust and love.
Our research, writing and experience over the past 20 years suggests that to be a strong brand that thrives after the current crisis you need to do three things:
- Act on Purpose: Have a clear understanding of the value you bring to your customers and society and act accordingly.
- Make it Personalised: Deliver an experience to your customers that is optimised for their needs.
- Move with Pace: Be agile and adapt quickly to changing market conditions, taking your people along with you.
Let’s look at these in turn:
1. Act on Purpose
We wrote a book in 2015 called On Purpose – Delivering a Branded Customer Experience People Love. We researched strong brands and interviewed their senior executives. We discovered that the main thing that sets these brands apart from the average organisation is their strong sense of purpose, a clear understanding of why they exist. However, we discovered that there are three types of purpose:
- Brand – creating value for customers.
- Commercial – creating value for stakeholders and executives.
- Social – creating value for broader society.
The best brands balance these and see them as connected. But they believe that the place to start is with brand purpose (i.e. satisfying the needs of your customers) because if you do that it leads to commercial success and shareholder returns. And if you do that in a way which is socially responsible, then you can sustain success long-term.
A perfect example is Amazon. Since its inception, Amazon focused relentlessly on its brand purpose “To be the earth’s most customer-centric company” rather than creating a return for shareholders or even creating a great experience for employees. Today, Amazon is the world’s most valuable company, Jeff Bezos is the wealthiest person on the planet and has pledged $10bn to address climate change. If Amazon now balances the three purposes it will be around for some while to come.
2. Make it personalised
Nuveen is one of our US-based clients. It is a trillion-dollar Global Investment Manager. It offers a broad array of asset classes and funds but is known for its socially responsible positioning. We worked with the leadership team to define their purpose statement at the beginning of this year and then conducted research and a customer experience workshop to design the experience to deliver it.
As a result of its purpose, ‘We invest and act responsibly to create an enduring impact on our world’ Nuveen quickly repurposed investment properties and storage facilities for medical equipment and has converted properties to temporary medical centres
From our research for Nuveen, a key client requirement was proactive and personalised communication. Clients wanted to be given information as early as possible about factors affecting their portfolios. We designed a new client experience with the leadership team that selected certain touchpoints as brand hallmarks. We call this our ‘EKG’ graph because it is like a heart line for the brand. For the sake of confidentiality, we won’t go into detail but suffice to say that Account Management and Monitoring was selected as a key area of focus.
As a result, Nuveen was one of the first investment managers to communicate with their clients about the impact of COVID-19 on the global markets with daily videos filmed by their Chief Strategist from home. They also started a series of conference calls with investment managers and clients. They have received tremendous feedback on the timeliness and strength of their investment content from clients, and it has also brought the company together as one team. They launched the ‘Nuveen Impact Grant’ which allows their sales professionals to give grants to support their own clients’ philanthropic efforts, enabling them to put the money to work at a local level. For example, one grant to Boston Food Bank gave 15,000 meals to people in need.
Jose Minaya, Nuveen’s Chief Executive Officer, recently wrote a personal letter to clients informing them of how the firm was continuing to support their needs and said:
“And as a private enterprise truly aligned with our clients, we are free from the distractions of managing to a stock price or quarterly earnings and able to focus solely on delivering the best outcomes for our clients and our world.”
His emphasis on delivering a purpose-led customer experience is exactly the shift towards a ‘new capitalism’ that we advocate, and leaders like Jose Minaya are in the vanguard of this movement.
The days of billionaire shareholders of publicly listed companies pleading for government hand-outs from their tax havens whilst still awarding themselves huge dividends are perhaps numbered.
3. Move at Pace
Moving at pace is crucial in a fast-changing world where agility is crucial. We believe it can be summed up by: Collaboration; Pivot and repurpose; and Mobilisation.
The coronavirus crisis has provided an opportunity for collaboration at speed.
- Project Pitlane is a consortium of seven F1 teams sharing resources and technology to develop a new ventilator for coronavirus patients in record time. It is already being manufactured by McLaren and other technology partners.
- In another incredibly competitive industry – big pharma – GSK is working with its greatest rival, Sanofi, to jointly develop a COVID-19 vaccine. Sanofi will contribute the antigen and GSK will contribute adjuvant technology to boost potency. They hope to develop the vaccine in 18 months rather than the usual 10 years and produce millions of treatments which, of course, will benefit consumers but also the two ‘competitors’.
When your purpose is about doing good for your customers and the world they live in, then sometimes, your competitors will be your collaborators.
Pivot and repurpose
At the start of the coronavirus crisis, an NHS Trust Manager wrote to the BBC asking if they could put him in touch with the luxury brand Burberry. He wanted them to make face masks and gowns for his hospitals. And Burberry are now doing so at their Castleford factory.
We worked with Burberry to define their customer experience some years ago. Burberry’s purpose is ‘Democratising Luxury’ which means that though they want to be aspirational, they also want to be accessible. Their quick pivot to making masks and gowns is an example of rapidly repurposing your teams to achieve a different outcome whilst staying relevant for customers and true to your brand.
Mobilise people but when you do make sure they are engaged and quickly become productive. 750,000 people volunteered to become NHS helpers, but there is widespread criticism they are not being used. Linda Moir, our colleague who ran the London 2012 Olympic Gamesmakers team, says that it is vital for people to feel that they are making a difference, so when you have volunteers you must ensure that they are used quickly and fully. They need to feel part of a movement, part of a greater cause. And they must be enabled to make a genuine contribution to that cause. That takes us to our last point.
We started by talking about his Hierarchy of Needs, in which Self-Actualisation was the pinnacle. What is much less well known is that shortly before he died, Maslow published a paper called Critique of Self-Actualisation Theory in which he said: ‘I got it wrong’. In fact, the highest order human need is what he called Self-Transcendence – contributing to a higher goal beyond oneself.
There is evidence that customers are now looking at the higher goal that lies behind the companies to which they are giving their hard-earned cash. They are expecting better behaviours from those companies in terms of how they treat their employees, how they impact society positively and, yes, how they add greater value to customers’ own lives.
So, is customer experience relevant anymore?
Well, it depends. If you define customer experience as some form of gold-plated service for a few high-value customers, then it probably isn’t that relevant at this time. If, however, you define it as we do, which is providing consistent, intentional, differentiated, value to your customers that improves their lives and the world in which they live then, arguably, it becomes even more important.
Some people believe that post-COVID-19, business will simply revert to normal. Others believe that nothing will ever be the same again. Our view is that the best brands will adapt and use this as an opportunity to rethink and reboot their business to suit the new reality of a more conscious and community-minded customer, as brands like Nuveen and Burberry are doing. Others will slip back into old habits and struggle, and the brands who were not that good before the crisis, but being propped up by a booming market, will simply disappear.
But what won’t change is the relevance of customer experience. The fundamentals of needing a strong brand, a clear purpose, focusing on your customers and ensuring your leaders and people are aligned and able to operate at speed will not change and will become even more important as consumers focus on what is most important in their lives and the brands that can provide it. And that requires a completely joined-up approach to a branded customer experience.
Andy Grove, the former CEO of Intel said: “Bad companies are destroyed by crises, good companies survive them, great companies are improved by them.”
Our view is that a purpose-led approach to business will not only improve those great companies, it might also change capitalism as we know it for good.
Founding Partner, Caffeine,
Managing Partner, Smith+Co