Skeptical musings on ‘treating different customers differently’ and the expertise of business gurus

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You may know that I value skepticism in the sense of questioning the taken for granted. In this post I question the central tenet of the customer business. And I question the insight and expertise of customer gurus and management consultants. Let’s start with the central tenet.

What is the right basis for treating different customers differently?

If there is a central tenet of the whole customer business (CRM, CXM, customer retention & loyalty) then it is this: treat different customers differently. How does that work in practice? There are two options: you can treat different customers differently based on their needs or based on their financial value. Which should take priority?

Imagine that you are in pain doubled up in the waiting room of a hospital emergency room. It is late at night during the new year holidays and there is a shortage of doctors. So there are some ten people there with you in the waiting room – each of whom is keen to get seen to quickly. What basis should be used to decide who gets access to the scarce/valuable ‘resource’ (the doctor) next? Should the basis be first come first served? Should it be the person who is in most need of urgent attention because his/her life is at risk? Should it be the person who is willing to pay the highest price – the one that represents the most financial value? What do you say?

What would the ‘customer guru’ say if he was to act consistently with his business philosophy? He would say that if the hospital is a business then the people in the waiting room should be divided up (segmented) first by their financial value (to the hospital) and then by their medical needs. Which means that the person who is going to make the most money for the hospital and who is most in need of urgent attention should be the next one to get to see the doctor.

What actually happened? I was that person in the waiting room doubled up with pain. And the lady next to me was in a lot of pain as well. We were talking and complaining about the shortage of doctors, how slow the process was, how long we had been waiting – over an hour. We both hoped that we would get seen to quickly – ideally next. Then a mother came in with a young child who was clearly in a lot of pain. What was our reaction? Both of us were adamant that the young child had to be seen next and seen immediately; we forgot our pain, we no longer thought about ourselves, our humanity reached out to that young child who was suffering so much! And I noticed that all the other adults in the waiting room forgot themselves and collectively we gave one big sigh of relief when that young child was taken to see the doctor after a couple of minutes. Clearly, the hospital got this because they were seeing us on the basis of our need – how serious our condition was. And that is what allowed us all to bear our pain and go with the system: the system occurred as fair, as just – as one that does justice to human dignity.

I hope that you get what I am getting at here. If you do not then let me spell it out for you. What the ‘customer gurus’ espouse contradicts certain ingrained values that go with being human. Most of us have a sense of ‘right’ and ‘wrong’ including that which contributes to our human dignity and that which takes away from our human dignity. Visibly treating different customer differently is a minefield because it brings out into the open the question of human dignity. It occurs to me that only people who are not called to by these values are economists, MBAs, business gurus ad management consultants.

Why you should be skeptical about business gurus and management consultants

First and foremost I say that you should be skeptical of any business guru and every management consultant because business gurus and management consultancies are in the business of passing of philosophy as science, as scientific management, as truth even if they are not aware that this is what they are doing. Put differently, when you take a thorough skeptical look then you find that the business gurus and management consultancies are like the king who was not wearing any clothes – it just took a child to see it and call it.

At his point, I wish to introduce you to Colin Shaw because has written a post that has generated high emotion. Colin is the CEO of Beyond Philosophy – a customer experience consultancy which makes a big point about the importance of tapping into the irrational side of customers and says it has a scientific proven method for doing so. On LinkedIn Colin describes himself as “Author 4 Customer Experience books | Consultant | Customer Retention & Customer Loyalty | Keynote Speaker”

His latest post hasn’t got the kind of reaction (comments) that he was expecting. I think it is fair to say he shows up as being totally surprised by the reaction as expressed through numerous comments many of which are not supportive of him and his point of view. Which occurs to me as interesting given that the heart of all things customer is a good grasp of the human condition. Colin starts off his latest post (Missed opportunities to identify high value Customers – Virgin Atlantic Case Study) with the following:

“I fly a lot. I have Diamond status on the Delta airlines loyalty scheme, the highest you can get. I really fly a lot! On my briefcase and all my bags I have the Delta Diamond tags. This is like wearing a beacon that says ‘this guy flies a lot’!

My question is, “When I fly with other airlines, do they ignore this display that says I am a high value Customer and could be one of your best customers?” It seems that my badge has the cloak of invisibility as everyone ignores it. Why?

Back in my past career, when I used to run call centers, I remember saying, “Wouldn’t it be great if we knew how much potential revenue the caller could spend with us”. The reality was if I knew someone could spend $1m dollars I would treat them differently to someone that could only spend $10. Airlines seem to ignore this in the choices they make when designing their Customer Experience. This is a lost opportunity.

Let me give you five examples from a recent experience with Virgin Atlantic on how they are missing these opportunities:”

What kind of reception did this post receive? An emotional one! A human one that discloses reality as experienced by the ordinary airline customers: the lived experience rather than theory. Allow me to share some of the comments that showed up as particularly interesting:

1. “Welcome to the real world Mr. Shaw!”

2. “is this dude serious?”

3. “Colin…here is part of the issue that people are having with your rant. I also fly quite a bit, but simply not enough to get this kind of status. When I go to the airport, I have to wait in a security line while people with “status” have their own priority line, and the airport decides that having the two lines converge on the same TSA agent is a good idea. This means that people without status feel that they are being held up because you have your fancy Delta tags. Then the boarding begins and they do the same thing…..put lines converging on a door where people with status move to the front and cause others to wait. Then there is me – a frequent flier who is in the airport enough to hate travel, and not enough flights to get the airlines to recognize how unpleasant it is to travel…..A significant part of that unpleasantness is the fact that I have to be put aside by a wave of people like yourself who have that level of status. Think about every other industry where status matters. Credit cards offer status to high value customers, but recipients of the cards do not inconvenience other card holders when they make a purchase, so no resentment exists. The backlash you are feeling is from people who have to witness and be inconvenienced by what we all know you deserve. Virgin should take care of you, but not at the expense of other travelers.

4. “Wait, it gets better. So now (in your clarification) you’re saying that Virgin could buy your loyalty back by putting you in a shorter check-in queue, and giving you a $48 rebate on your excess baggage, and accepting responsibility because you had lost your headphones? So, not only are you arrogant and self-important, you have no brand loyalty – Delta should value their relationship with you so highly that they treat you like a king, but you value YOUR relationship with Delta so little that after years of good service, upgrades, priority check-in, etc. you’d defect to Virgin for $48 and a check-in queue that is 3 minutes shorter. In other words, for you brand loyalty is a one-way street. As one of the previous comments asked, who exactly do you consult for? I bet they’d be interested to know your new views on asymmetric brand loyalty, and on exactly what can be bought for $48 and 3 minutes…… Then, in your next follow-up, you suggest that you should be treated better than other economy class passengers because you travel more often! So now you’re expecting Club Class treatment while flying economy! Amazing! I drive far more than average, should I have a booklet of “get off with speeding fines” vouchers, or my own special lane as a reward for being a frequent driver? With each post your position sounds more and more ridiculous. Please, stop digging, it’s becoming embarrassing.

5. “Over 700 million a year fly a year. What makes you any different? Are you military flying back and forth from deployments? No I didn’t think so. Those are the only people that deserve to be treated like royalty when flying. Though I’m sure you’ve given up your first class seat multiple times for a military member haven’t you. No, I didn’t think so. Should people that ride the bus to work on a daily basis be treated better than a person who only rides it occasionally? Did you once think why they have to limit carry on size? Maybe they have calculated the capacity of the overhead storage and this allows all customers to be able to store the same amount of carry on luggage. Its ok cause you fly so much everyone else should have to suffer so you can carry your oversize bags. I bet that $48 dollars will make you think twice before trying to carry on a small suit case next time. Then again if your so high value, I’m sure $48 is pennies to you People try to do this all the time, carry on large bags to avoid waiting at the luggage belts. I fly with Virgin anytime I fly home to the UK with no complaints. Then again I don’t expect to have my A#$ kissed everytime I fly. If thats what your looking for, maybe you should be looking at different services. 2 christmas ago I got stuck in London due to blizzard that hit the east coast of the U.S. While other airlines had their customers sleeping on air port floors, Virgin paid in advance for hotel for 3 nights and even paid 75% of my expenses. Its funny you pick Virgin to bash on when customer service is so terrible and a lot worse in so many other services. Have you tried to call your cable recently or tried making a large purchase at Best Buy during the holiday season? Try bashing them for not bowing down before you go after airlines.”

6. “”Try replacing the word airline with wife/husband/partner. I used to take her out to nice restaurants, go on romantic holidays, buy her presents. Then I left her for someone closer to work. The other week I thought I’d pop round to see her. With my new kids. Showed her pictures of us on holiday. And then (and this makes me really angry), she says she’s moved on!!”

7. “You seem to be a very important man. How disconnected from real life you must be…”

And finally

I say that if you want to excel at the game of Customer then cultivate the human. My experience is that to excel at the Customer game one has to have an intuitive feel for the human in the human being. How do you do that? By putting yourself into real, commonplace, human situations and being present to what shows up for you. By reading the right kind of literature – that means avoiding business and management books!

I say that be skeptical about any advice coming from Tops, business gurus, management consultants, MBAs and economists. Why? They are either disconnected from real life – the real world experienced by most of humanity, most of your customers. And, like all philosophers they fall so in love with their philosophy that he forget that it is just philosophy – at best a partial view of reality. I really do believe that Colin Shaw thinks that he is not doing philosophy and that is why he has called his business Beyond Philosophy.

Please note, I have only used Colin Shaw and Beyond Philosophy as an example to illustrate a point simply because this landed on my lap at the right time. Recently, there was the much publicised demise of The Monitor Group a strategic consultancy established by the king of strategy (Michael Porter). Which is my way of saying that I am talking about academics, consultants, gurus and not any one single person or organisation.

What do you say?

Republished with author's permission from original post.

Maz Iqbal
Independent
Experienced management consultant and customer strategist who has been grappling with 'customer-centric business' since early 1999.

2 COMMENTS

  1. Maz –

    For the benefit of CustomerThink readers, here is the response I provided to your original blog post:

    “I've known Colin for many years, very much respect him as a champion for customer experience optimization, and appreciate his perspectives. Although his comments were, somewhat unfortunately, taken as 'holier than thou' pedantic posturing (in part because one airline doesn't typically recognize, or much care about, an individual traveler's status with another airline), there's a valid central point here. All companies would benefit from having better, more real-time and real-world, and more actionable insights into the emotional and rational drivers of customer decision-making.”

    Many of the points you made in response to my reply have a lot of merit; and it would probably also be useful to repeat them here. I’d add to my statements the fact that, with further respect to Colin’s perspective, much of consumer behavior, in both b2b and b2c situations, is driven by emotional, irrational, and non-linear considerations. Convenience, for example, has both rational and emotional meaning for many customers; and, if it declines, this can often be a strong motivator for risk and churn.

    On the enterprise side, the organization can meet both customer-centricity and profit goals by focusing on employee behavior, especially where customers and their experiences are concerned, customer-focused processes (which include effective systems), and a customer-sensitive culture. That said, it’s often incumbent for companies to make at least some accommodations for better-performing customers, and also to use insights about what drives customer loyalty and advocacy to move less
    active customers in a positive way, and to neutralize or eliminate elements of delivered experience and value which create negativity.

    I think one of Colin’s key points reflects an inside-out customer advocacy point of view expressed, somewhat, by my colleague Peter Fader, a marketing professor at The Wharton School, in his 2011 book, Customer Centricity: “Customer centricity is about identifying your most valuable customers – and then doing everything in your power to make as much money from them as possible and to find more customers like them. These customers give you a strategic advantage over your competitors; it’s a strategic advantage that could be the best path forward for many companies.” Although this statement reads black-and-white, in practice achieving real customer focus often requires more shades in between. What I take from your blog – and a perspective with which I have strong agreement (see my CustomerThink blog: http://www.customerthink.com/article/inside_out_advocacy_creating_and_sustaining_customer_centricity_and_loyalty) – is that, in moving to greater customer-centricity, companies would also benefit from taking a more humanistic, balanced approach to customer value creation.

  2. Hello Michael

    I am responding to your comment out of my respect for you – you show up for me as a person of requisite ‘balance’ and ‘good soul’.

    Before I dive into my response I wish to point out that I have a BSc in Applied Physics – Physics is the original/genuine science. When physics talks of laws – say gravity, thermodynamics, optics – you do not have to take them on trust. You can test them out, anyone can test them out, and they are repeatable. Furthermore, as a genuine science physics allows you to confidently predict what will occur. Which is why we can consistently do the most amazing things like put rockets into space and bring them back home safe. And I also have a passion for philosophy – right now I am grappling with the works of Martin Heidegger, not the easiest of philosophers.

    A – Should companies focus on their most valuable customers?
    How do you determine your most valuable customers? Do you look at the customers who in the last twelve months generated the most revenue for you? Or is it the customers that made the most profit for you? And if the world is non-linear, as you point out, then how can you be confident that these customers will be the ones that will continue to be the most profitable for you in the next twelve months? Or should you look at the next 24 months as opposed to the next 12 months? Or should you look at the next five years, 10 years?

    Let’s add in another complication. Let’s assume that I, as your customer, do not show up as valuable customers based on what I spend with you. Does that mean I am not valuable in reality? What if I talking about you, WOM, raving about how well you treat an ordinary customer like me, and that then drives a lot more people to do business with you? Have you factored that in? Where are you going to get that information from?

    Let’s assume that you have looked at the past, like direct marketers do in terms of rfm (which is where a lot of CRM orthodoxy comes from) and have segmented your customer base on the basis of financial value. Great. Now what is the basis of saying that you should focus on the highest value customers? Why not ask the question, why are we getting such a poor response from the low value customers? Is there something that we can do differently to be more attractive to these low value customers? Another way of thinking is to say we know that the way we are doing business works for high value customers – so lets just continue as is. And look for ways of creating/generating value out of the low value customers. Or if you take the political analogy you can say lets leave the high value customers alone because we know they are firmly attached to the brand. And lets not deal with the low value customers because they are attached to the competition. So lets focus resources on the customers in the middle – the ‘undecided customers’.

    Another big challenge to the CRM orthodoxy of focussing on your best customers is Clayton Christensen and his theory/model of disruptive innovation. What does he say? He says that in industry of industry that has been disrupted – take automobiles – the focussing of incumbents on their best customers and ignoring the worst, or even non-customers, is what has allowed new entrants to disrupt the industry and put the incumbents at risk. How does Peter Fader et al address this issue? They don’t. As for as I can see a nugget of insight based on the mail order industry – direct marketing – has been used to build a philosophically based edifice!

    B – Improve the Customer Experience and Customers Will Stay With You
    In his story Colin pointed out that whilst he used to fly Virgin Atlantic and he liked the experience – the travel experience – he switched to Delta. Why? Convenience. At the very minimum this tells you that any work on improving the customer experience may be wasteful if you are not the most convenient supplier. Put differently, there is an argument for saying forget all this customer interaction stuff, just focus on convenience. Get that right and simply be OK with all the customer interaction stuff and you will win. My experience validates this in many instances for many different suppliers. We do not optimise, we satisfice: good enough is good enough for the vast majority of people! Simon came up with this many years ago and it seems that the CRM movement have forgotten this.

    Look at the flip side, Colin made it clear he had Diamond status with Delta and he has been getting great – royal – treatment from Delta. And at the same time he clearly states that he is open to switching to Virgin if only Virgin flew out of Atlanta. Does not that in itself undermine the whole loyalty argument. Here is Delta doing everything right for a valuable customer and the customer takes that for granted. It does not secure his loyalty. So what is the point of going to all the effort of securing loyalty from high value customers? At the very minimum that question requires genuine consideration.

    C – Diamond tags and expecting royal treatment from Virgin Atlantic
    What is the key issue here? Assume that cabin crew are told to look for these kind of Diamond tags and then hand out preferential treatment to those customers – of different airlines. What is likely to occur? I can see a roaring trade in counterfeit Diamond tags! So you arrive at a situation where the badge loses its sign value.

    What is a different way of interpreting the fact that Colin is Diamond status customer of Delta when he shows up on Virgin Atlantic? A common sense interpretation is this: this guy has bought into and is committed to flying Delta. So he is using us, Virgin Atlantic, as a one-off so lets not make any effort to treat his as a special, valuable, customer! No, we should focus on passengers on this plane who are the most loyal/valuable customers of Virgin Atlantic!

    D – Beyond Philosophy and the irrational in the customer
    What is new here? What is truly insightful? Sigmund Freud made this clear well over 70 years ago and most of us know that we do what we do as a result of both ‘rational’ and ‘irrational’ drives. What is interesting is that Gerd Gigenzer (dutch psychologist) says that the ‘irrational’ label is not appropriate – that in fact people using their gut instinct based heuristics are being ‘rational’.

    Now the key for me is that Beyond Philosophy claims on their website to have a scientific method for getting access to and measuring the ‘irrational’ elements. Is it really scientifically proven? By whom? Can we use the Beyond Philosophy scientific method to make predictions and then test them out? That is what you can do with a genuine science like Physics. If you can then where is the data: we predicted X, and this is what showed up?

    Where do I stand? I say that the research and my own experience suggests that one ignores how customers respond to surveys (discrediting as you can shape response through wording/phasing of question), one is skeptical of what answers customers provide when you questions them. And one pays attention to what customers actually do – again and again. Which is my way of saying that if you want to get at customers look at what they do rather than dive into their minds to access the subconscious.

    E – Being detached from reality and my issue with Colin

    Now, here is my biggest issue with Colin. For me, Colin shows up as being detached from reality! That for me is the first sign that someone is living in ‘the academic tower’ or the ‘philosophers hut’. The reaction Colin got occurs to me as predictable. We live in societies where much is made of equality and everyone being treated equally/fairly. And with the airlines this is a big issue. Because the people who do not have Diamond status like Colin resent being treated ‘as cattle’ whilst people like Colin are treated as royalty. That is just so! We, the ordinary customers, do not like being pushed aside so that the Diamond status folks get to board the plane first. We don’t mind them having bigger seats and we don’t mind them having better food. We do mind how our sense of ‘self worth’ is undermined by the airlines – how we are treated as second class citizens when it comes to boarding the plane. Furthermore, it does not take a genius to get the resentment the airline passenger has towards passengers who take on board oversize luggage and thus deprive us of space to put our luggage in the overhead bins.

    The other aspect of reality (as opposed to theory) that I have mentioned is that visibly treating some people more favourably than others in a confined space like an aeroplane is a minefield. It smacks of favouritism and thus breeds resentment even anger. Treat one person this way and others will ask for the same treatment. Don’t provide it and you have issues – you breed complaints.

    Michael, I will stop here. I could go on and it occurs to me that there is no value in doing so. Honestly, I do feel sorry for Colin – it occurs to me that he has undermined his credibility in a public forum. That cannot be a pleasant experience.

    Maz

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