Monthly Archives: May 2011

What is this beast called “customer focussed strategy”?

I came across this post by Becky Carroll and it got me thinking and I’d like to share that thinking with you.  This post is rather long, technical in parts (though I have made an effort to keep it simple and short) and will only be interesting to strategist or those of you who have an interest in strategy.  If you don’t then I suggest you go read something else.  If you have the interest and/or open to making the effort to learn something new then please read on.

Is ‘customer focussed strategy’ the same beast as ‘customer strategy’?

If you read Becky’s post you will note that she does not define  ‘customer focussed strategy  She actually defines  ‘customer strategy’.  And this is her definition: “Put simply, a customer strategy is a proactive plan for how we want to acquire, retain, and grow our customers! “

When I examine this topic, from my viewpoint,  then the following occurs to me:

  • ‘customer focussed strategy’ and ‘customer strategyare two different beasts – they are not the same beast;
  • a strategy is a strategy and a plan is a plan – they are not the same beast.

Exploring the creature ‘strategy’

There is no shared agreement on the creature ‘strategy’.  Different authors and speakers describe it differently.  Some people (me included) consider this to be word that the speaker uses when he wants his topic to be given respect and consideration from those that wield power, influence and patronage. So let’s go back to the roots of strategy – the military.

Picture the following situation.  The place is ancient china and the period is the Warring States Period.  China is split into Qin, Chu, Han, Wei, Qi, Yan and Zhao – seven warring states.  Lets further assume you are the key advisor to the ruler of Yan a relatively weak state.  And your lord wants you to come up with a strategy that gives him enough time to build up his military forces against possible invasion by the states of Zhao or Qi.   So the political objective is to buy time.  And you have to develop a strategy to do just that.

Lesson 1 : strategy is a cognitive (thinking based) response to an important (usually political) objective. 

Lets continue with the analogy.  As the strategist you ‘strategise’ – you discuss, you observe, you study, you play mind games – and come up with some options.  Option 1: you can cement an alliance with the state of Zhao or Qi – thus making yourself stronger and less likely to be attacked.  Option 2: you can get Qin to start a war against Zhao and Chu against Qi – this will keep Zhao and Qi busy and buy you that time.  Option 3: you can ‘buy’ the key advisors to the states of Zhao and Qi and get them to convince their lords to wage war on each other.  Option 4: you can buy key people in Zhao and Qi and get them to sow discord within Zhao and Qi so that you instigate civil war and so forth.  The options are limited only by your ‘intelligence’ (your understanding of the ‘terrain’ in its many facets) and your mental agility to come up with creative and workable options.

After discussion and consideration you may choose Option 1 or 2 or 3 or …If  you did that then, in my books, you are a novice strategist.  If on the other hand you are a seasoned strategist your strategy will be some kind of clever combination of these options.  Why?  To take into account both the fact that all information is incomplete; the facts on the ground can change quickly;  the principle of synergy; and its a good idea to have a back-up plan.  Notice that at this stage you have not developed a plan of how you are going to implement your strategy.

Lesson 2: a good strategist makes use of creative thinking, analytical thinking and synergestic thinking; he also uses his intuition based on his experience of men, armies, maneuvers, battles etc.

Lesson 3 : strategy requires an in depth understanding of self, of other and the facts on the ground.  If you have a sufficiently inaccurate map of the ‘territory’ then are likely to come up with a strategy this is inappropriate, is easily seen through or simply isn’t implemented. 

Lets switch from the military to business and explore this domain

In general the business objective is some combination of growth, profits and profitability.   Business strategy is the cognitive process for mapping/exploring the terrain; thinking up, exploring and evaluating options; and placing your bets on certain options as opposed to others.  What might these options look like in the business world?  Let highlight a few:

  • Expanding into new geographical markets;
  • Buying up competitors thus reducing competition and driving up prices;
  • Buying up promising start-ups (e.g. Cisco)
  • Expanding into adjacent  existing markets (e.g. from computers to computer, printers and networking devices);
  • Expanding into non-adjacent but profitable markets (e.g. GE with financial services);
  • Creating new markets entirely by seeing the world differently and/or using emerging technologies  (e.g. Apple ipod/itunes, Amazon);
  • Ramping up the marketing and advertising spend;
  • Selling unpromising or unprofitable businesses;
  • Ramping up new product development so as to refresh the product quicker and more often (e.g. car industry);
  • Getting a bigger share of your customers wallet (e.g. Tesco, Amazon, Ebay);
  • Attracting new customers by building a reputation for doing a great job of looking after your existing customers (e.g. Zappos);
  • New business model (e.g. Virgin, Skype, IBM) ……

Once you have made your choice of these options then you have your business strategy.  Now we are in a position to take a look at the creature ‘customer focussed strategy’.

‘Customer focussed strategy': a business strategy focussed on building mutually profitable relationships with customers? 

Is it possible ‘customer focussed strategy’ is a business strategy.  Specifically, a business strategy that seeks to deliver the prime business objective by focussing on cultivating mutually profitable relationships with customers?

In my thinking and my work I have made it mean that ‘customer focussed strategy’ is a cognitive response to a long term growth-profit-profitability objective that involves the creation, investigation, selection and combination of business options to cultivate mutually profitable relationships with the customers that you have chosen to do business with in  .  Let’s unpack that a little bit more:

First, a ‘customer focussed strategy’ focusses in on fit and as such involves choosing which customers you will focus upon because they hold the most promise for a mutually profitable relationship.  This implies that you may take action to ‘harvest’ some customers and ‘divest’ other customers.

Second, it involves selecting options that build strong relationships with your customers over the longer termIt also means letting go of options that you have been holding onto tightly and which cause relationships to fray and stain your reputation.  As I mentioned in one of my earlier posts Zappos CEO pulled the plug on the 25% of the business - the part of the business that was cashflow rich when Zappos was fast running out of cash.  Why?  Because this part of the business was also the business that was generating dissatisfied customers through poor service.  To paraphrase Michael Porter strategy is as much about the options that you give up and forgo as it is about which options you select and focus upon.

Third, it requires the selection of options that build mutually profitable relationships. Which means options that create value for your chosen customers and which (in combination) give you a big enough share of the value that you create.

Fourth, your focus is on attaining the longer term growth-profit-profitability objective.  In military terms you are selecting the options  that hold the best promise of winning the war and reaping the benefits of peace.  Options that require short term sacrifices including losing/giving up valuable resources and losing various battles if you are to win the war.  The classic military example is Mao Zedong’s retreat when some 90% of his fighting force died during the long march.  The great business example that comes to mind is Zappos – which I mentioned above under point 2 (above).

Fifth, it is as much about the the thinking process that you go through as it is about any words on a paper document or tasks in a project plan.  Put differently what makes a ‘strategy’ strategic is the process and quality of the thinking (creative, analytical, synergistic).  In my view most business strategies are weak because they are mostly predictable.

Question for you

That is enough from me.  What do you think?



Valuable insight from the European Customer Experience World event

I read this from Steve West on LinkedIn and feel compelled to share it with you because it provides great insight in few words:

“The European Customer Experience World event held this week in London highlighted a very important fact. Companies whose foundations are built around the customer experience from inception are able to be flexible, fast and focused on implementing process change that is customer centric. Zappos being a prime example. Namely because it feels natural for everyone on the organisation to move with the customer. However, companies whose foundations have been built on commercial objectives that are not aligned with customer centricity find it very difficult to change the legacy of their ingrained attitude and culture. At the event we heard lots of examples from well known brands where it has taken up to 10 years just to get the Board to recognise the value of CEM – and that’s even before customer focused changes can start to take place!”

I want to share another way of saying the same thing but with deep insight into the human condition is:

“One creates from nothing.  If you try to create from something you are just changing something.   So in order to create something you have to be able to create nothing.  To make sure a person does not find out who he is, convince him that he can’t really make anything disappear.  All that is left then is to resist, resist, solve, fix, help or change things.  That’s trying to make something out of something.”

I will let you figure out who said that.  If you really want to know the name of the author – who incidentally teaches leadership and transformation – then email me.

Why companies are wasting time and money on the Voice of the Customer

I have an issue with the VoC thing

Many large companies are busy tapping into the VoC.  In principle this is a great thing to do because the majority of companies do not have a good enough understanding of their customers.  In practice, I am left feeling that we will see a repeat of the technology centred CRM love fest:  these companies will collectively spend billions, the software companies will get fat and customer satisfaction will stay pretty much the same.   So what is my issue with the VoC thing?

A simplified look at the VoC process and issues

First, let’s take a look at the VoC process:

  • Determine listening posts;
  • Set up listening posts (platforms, tools, people);
  • Collect and consolidate the data;
  • Interpret (make sense of) the data;
  • Sell the interpretation of the data to the various Barons inside the enterprise;
  • Get the Barons to take action in their respective areas; and
  • Monitor/assess the impact on customers (and the business).

If you take a deep look into this you will notice an array of issues:  First, when it comes to surveys how do you know that you are asking the right questions and not ‘leading the witness’?  Second, how do you get access to all the customers that don’t want to complete surveys and make complaints?  Third, how can you be sure that the data you have collected is information and not noise?   Fourth, how do you know that your customer insight team is interpreting the data correctly?  And so on…..

The real issue: VoC can act as a barrier to connecting and empathising with the customers

These issues hide a much more important issue that VoC is a rational solution to an emotional issue.  What do I mean?  The challenge is to get the Baron’s out of their offices and shoes and experience the world  by walking in their customer’s shoes.

Put differently, the challenge is to get the Baron’s to emotionally connect with their customers by experiencing what these customer experience.  And if you accept this  then you will get that VoC programme gives these Baron’s the illusion that they can and do understand customers by reading the reports produced by the customer insight teams.

The problem with this intellectual understanding is that it is purely intellectual.   Intellectual understanding is dangerous because it leaves us thinking we have got it when we have not got it.  What do I mean?

I mean that we have not get it emotionally. That we are not touched, moved, inspired to take action because of having experienced our customer’s lives.  There is a whole body of neuroscience research that shows that the seat of all human action is the emotions and that we can feel/experience what other human beings feel/experience through mirror neurons.  To empathise with our fellow human beings we simply have to connect with them in the context of their day-to-day lives and then let the mirror neurons do the work.

What happens when an industry has no empathy for its customers

Why is that important? Frankly, if the Baron’s cannot or do not empathise with their customers then you end up treating your customers the way that the UK banks treat their customers.  Upon reading this article two paragraphs caught my attention:

“The fine reflects BOS’s serious failure to treat vulnerable customers fairly,” said Tracey McDermott, the acting director of enforcement at the FSA. “The firm’s failure to ensure it had a robust complaint-handling process in place led to a significant number of complaints being rejected when they should have been upheld.”

“We have fallen short of the high standards of service our customers should be able to expect of us and we apologize,” said Ray Milne, the risk director at Bank of Scotland. “We are in the process of contacting affected customers and will pay compensation where it is due.”

It is not hard to treat customers fairly.  The failure to do so by the banks and hide behind platitudes is simply a reflection of the gulf between the Baron’s who make policy and the customers who are impacted by the policy.

How do you cultivate empathy?

Empathy is the route to the human soul and any person who strives to get a meaningful insight into customers lives has to excel at empathy.  So how do you cultivate empathy?  I urge you to watch and listen attentively to the following TED video:   http://www.ted.com/talks/lang/eng/sam_richards_a_radical_experiment_in_empathy.html

Just in case you do not have the time here is a key extract from this presentation:

“Step outside of your tiny little world.

Step inside of the tiny little world of somebody else.

And then do it again, and do it again, and do it again.

And suddenly all of these tiny little worlds they come together in this complex web.

And they build a big complex world.

And suddenly without realizing it

you’re seeing the world differently.

Everything has changed.”

To sum it al up

To exaggerate I would say that an ounce of empathy is worth a mountain of VoC data.  Yet, I do not have fame to my name so I will let one of the worlds renowned business strategists (Kenichi Ohmae) say the final words:

“Personally, I would much rather talk with three homemakers for two hours each on their feelings about, say, washing machines than conduct a 1,000 person survey on the same topic.  I get much better insight and perspective on what customers are really looking for.”

A tale of two car breakdown companies and the six lessons you can learn

I have been a loyal customer of the RAC for over 16 years

In the UK the two main car breakdown companies are the RAC and the AA – they are both reputable.  I have been buying breakdown cover from the RAC for over 16 years.  Each year the RAC send me a renewal quote and I simply let them renew the cover.  I don’t go and check the websites to get quotes from other providers.  Why?  Each time I have needed the RAC they have delivered.  In particular, the RAC won my heart when my wife and 3 young children were coming back from France and their car broke down near Paris.  The RAC made sure that my family was taken care of and got them safely back to the UK even though the car could not be repaired at the roadside.

So when the renewal reminder came in this month I simply accepted that I would renew with the RAC.  Then I got a car breakdown renewal reminder from the AA; I had taken out car insurance with the AA last year and took out car breakdown cover even though I did not need it because by taking it out I got a significant discount on the car insurance premium that more than paid for the car breakdown cover.

How two young ladies brought the AA brand to life and won me as a customer

When I rang the AA call centre I was greeted by a friendly voice and I told her that I did not wish to renew the breakdown cover.  She put me through to the retention team.  My call was picked up straight away by another friendly, bubbly, voice who asked me why I was not choosing not to renew.  I told her that I had only taken out the AA breakdown cover because of the car insurance discount and was a long standing happy RAC customer.  She asked me if I would give her the opportunity to offer me a competitive quote.  Because she was so great on the phone with me I agreed.

She came back with a quote that saved me some 40% on the renewal quote put forward by the RAC.  Because of the value that she had created for me and how she was being on the phone (friendly, enthusiastic, helpful, validating) I agreed to take up that quote.  This young lady then proceeded to ask me questions to provide the comprehensive cover I needed.  At one stage she asked me my wife’s birthday.  When she picked up the uncertainty in my reply she empathised and made playful fun of me / with me.  This little interaction here – a fundamentally human interaction – made the whole experience stand out memorably!

Lesson 1:  if you want to win your competitors loyal customer then you need to create value for that customer.  You can do that in many ways.  The AA created emotional value for me – the young lady that I spoke with made we feel great about talking with her and signing on with the AA.  She was also given the freedom from the AA to create economic value for me by saving me 40% of the RAC price.

Lesson 2: your employees shape the customer’s perception of your brand so choose them wisely. I do not know what the components of the AA brand are.  I do not know how the marketing dept want the AA brand to be portrayed.  I do know that as a result of my conversations with the two AA call centre agents I am left thinking/feeling that the AA is a fresh, friendly, enthusiastic and helpful organisation.  That appeals to me and that is why I am happy to be an AA customer.

How the RAC failed to keep me as a customer

After I signed up with the AA I rang the RAC to cancel the automated renewal.  The RAC call centre agent asked why I was not renewing and I told her.  She asked if I would give her a chance to offer a competitive quote and I reluctantly agreed.  Why reluctantly?  On the one hand I had established an affinity with the AA and was happy on the choice I had made.  On the other hand the RAC had looked after me well for 16 years.  The call centre agent came back and told me that the figure I had quoted could not be right – her system was telling her that it was £10 higher.  I did not take this well because I was thinking I am doing you a favour by letting you quote  and you are implying that I am a liar! So I asked this call centre agent to make sure that my breakdown cover was not renewed and ended the call.

Lesson 3: never imply that your customer is lying – we do not take this well especially when we are telling the truth!

Lesson 4: there is absolutely no point in spending money on CRM systems if you employees are not going to use them when it matters.  If the RAC call centre agent had looked into her CRM system she could have reminded me about the times that I had needed their help and they had delivered.  She could have not played the price game and played the relationship and reciprocity

Lesson 5: if you have not given your customer facing staff access to a full view of the customer’s relationship with your organisation (through a CRM system) then you are asking them to compete in a race (for the customer) with their legs tied together.

Lesson 6:  if you don’t give your customer facing staff the freedom to be flexible and use their judgement then they will not be able to do what it takes to win over customers.  I suspect that the competitive intelligence unit with the RAC had fed the AA prices into the computer system and the RAC agent had to stick with those competitive prices.  And that is how she ended up implying that I was lying on the price I had been given by the AA.


Better World Books: a great example of hi-touch relationship marketing

Better World Books is a customer-centred company

We like customer-centric companies because they leave us feeling good.  And also because the kind of behaviour that we label as being customer-centred is rare.  It is the combination of the two that put Better World Books on my emotional radar back in December 2010 when I received an email from Better World Books that took me by surprise and delighted me.  I was so impressed that I wrote the following post which I encourage you to read: ‘Better World Books: a great example of customer-centricity’.

Their latest email is a great example of hi-touch relationship marketing

Today I opened up an email from Better World Books that left me smiling, laughing and just delighted.   In fact, this email is such a good example of hi-touch relationship marketing that I want to share that email with you.  Here it is:

Dear Maz,

We’re just checking in to see if you received your order (The Hidden Connections: A Science for Sustainable Living). If it hasn’t arrived please respond to this email and let us know.

We aim to flabbergast our customers with impeccable service so do let us know if we haven’t achieved this in your case by responding to this email. Amazon.co.uk gives you the opportunity to leave us feedback. You can do this by visiting http://www.amazon.co.uk/feedback . We would be grateful if you would take the time to rate us on the order and service received.

Thanks again for buying from us.

Humbly Yours,

Indaba (our super-cool email robot)”

Straight after reading the email I went to Amazon and gave Better World Books a five star rating – the maximum.  And here I am sharing it with you. 

What makes this email so effective, so delightful?

The vast majority of business communications strike me as dull, inhuman (corporate speak) and the communicator pushing stuff at me.  And as such I tend to ignore them – I suspect that you do the same and that is why direct mail response rates are around 1 – 2%!   So what makes this email so effective?

“Dear Maz” - Maz is what I call myself yet it is not my first name and it is not on Amazon’s records.  So it is clear that Better World Books have gone the extra mile to figure out, record and use my preferred first name.  That is a great first touch – only friends and colleagues call me ‘Maz’.

“We’re just checking in to see if you have received your order.. – the way that I relate to this is wow here is a company that cares about me and is checking to see if all is ok and if not it is inviting me to get in touch with them.

“We aim to flabbergast our customers with impeccable service… – this sentence has such a resonance because of my past experience with Better World Books, the fact that the book that I ordered arrived before it’s due date and because of this email.  Put differently, I totally believe that Better World Books are being straight when they say that they aim to flabbergast their customers with impeccable service.  Lastly, I am simply flabbergasted that I company would make such a statement in writing.  I have never read that kind of statement from any other company that I do business with!

“Amazon.co.uk gives you the opportunity to leave us feedback..” – they are inviting me to leave feedback and it really does occur as an invitation that I can accept or decline, there is no hard sell.  Yet by the time Better World Books are making this invitation they have done all that is necessary to get that feedback, positive feedback, from me;

“Thanks again for buying from us. – as human beings we do like to be acknowledged and a simple thank you is great way of acknowledging our customers and making them feel good about us;

“Humbly Yours,  Indaba (our super-cool email robot)” – I cannot tell you why but at some emotional level I simply love this ending.  It is so unpretentious and it is something that one of my best friends would write.  And there is a wonderful twist: it really would be something if a robot was writing such a personal email that pushes so many emotional buttons!

It is short and it is easy to understand – it probably took me less than 30 seconds to read it and get it both emotionally and rationally.

Conclusion

In the west we live in and are immersed in a technology centred world and this technology has brought us great benefits.  The downside is that it has encouraged businesses to act like machines.  In the process many of us, especially as customers and employees, are starved of the human touch that reaches into our emotional core.  So there is gaping hole waiting to be filled by smart companies like Better World Books who use hi-tech to practice hi-touch!

One more thing to mention

There is world of difference between relationship marketing and database driven direct marketing practices by most customer marketing groups.  Relationship marketing aims to build relationships  through emotional bonds like this email from Better World Books.  As such relationship marketing communications are not all about selling.  This is sharp contrast to database driven direct marketing masquerading as relationship marketing.  How can you tell the difference?  You only hear from the latter when they have something to sell to you in part because these marketers cannot demonstrate ROI on service centred communications.



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