Is this the real state of ‘customer-centric’ business? (part II)

In an earlier post in which I shared my take on an informal discussion that took place  between 10 – 12 customer oriented / customer centred gurus, authors, consultants …….. In these follow-up posts I want to address/respond to some of the points that raised in the comments to that post and to this post by Steve Towers on a customer focus and Ryanair.

Colin Shaw: customer-centricity is essentially a state of mind

Colin Shaw asserts that customer-centricity is a state of mind.  This is what he writes (bolding is my work):

“Customer Centricity for me doesn’t mean you give the Customer everything they want. We have always thought Customer centricity is about how you are ‘orientated. For example if your boss asks you to work late, if you are family orientated you would say ‘no I need to get home and see the family’. If you are career orientated you would say ‘you are happy to work late’. Therefore with the same set of circumstances, dependent on your orientation, you make a different decision. The same thus applies with decisions that affect a Customer. Thus Customer centricity is a state of mind…”

Notice that Colin leaves aside the troublesome issue of what kind of ‘state of mind’ it is.  Is it a ‘state of mind’ where you use your armoury to exploit the weaknesses of your customers to make money (extraction)?  Is it the ‘state of mind’ where you use your knowledge/expertise/ resources to create genuine value for customers (do the jobs they want done.treat them the way they want to be treated) and have put in place a business model that allows you to get your fair share of the value that you create? Is it some ‘state of mind’?

I will come back to this central point at the end of the post.  First I want to deal with the widespread belief – though not spoken bluntly – that it is naive to think that you can act generously, do the right thing by customers, to treat them fairly.

Customer-centricity does not require your business to be a ‘patsy’

Does any serious thinker assert that customer-centricity involves/requires that the organisation give the Customer everything that he wants?  No.  If a customer bought an economy ticket and then insisted on sitting in first class then I suspect that all of us would say that the airline has the right to insist that the customer take his seat in economy or pay the upgrade fee if there is a free seat in first class.  Let’s take government, must the government let the Customer not pay his taxes because he does not want to?  No, I say that the true mark of customer-centricity in this case is ensuring that the everyone who is obliged to pay taxes does so – the right amount at the right time.  To let some people get away with not paying taxes is to be ‘not customer-centric’ as it penalises all the Customers who do pay taxes.

Let’s address another point that is related to this point: the fear that customers will act unreasonably and bleed the company dry if the company acts generously towards even a few customers.  Is this a realistic fear?  Allow me to share with you some personal stories and examples of companies that do well by being generous towards their customers.

a) A car with four bald tyres, the owner doesn’t have the money to replace them

My brother runs an automotive business – sales, servicing, valeting – and one day a young woman came in and left her car to be serviced.  He did the service and in the process noticed that all four of the tyres needed to be replaced – they were worn out and under the legal limit.  When the young woman came to pick up her care he showed her the tyres and told her that they needed replacing.  She agreed and told him that she did not have the money to get them replaced. She paid him what she owed for the service and was about to drive away.  My brother asked her to stop and then got busy replacing the tyres – all the time this woman was telling him she could not pay him.  When he was finished he told her that the tyres wer free of charge.

This young woman could not believe what had happened and asked him why he had done what he had done.  He told her that he noticed two baby seats in the car and so it was clear that she was a mother and responsible for 3 lives when she was driving that car.  And given that he was not willing to let her drive a car with bald tyres. “This is what I would do for my sister”.   This young woman drove away in tears.

The next day this young woman turned up at his garage and insisted on paying him for the tyres.  When she would not take “No” for an answer my brother took her money and asked her where she had got the money from.  The young woman told him that she had borrowed the money from her mother.  He asked her why she had done that?  She told him that she had driven away in gratitude and felt an enormous pressure to repay his kindness, his generosity.

How does this story end?  This act of genuine kindness has resulted in my brother getting more business. How through ‘word of mouth’: people talk and this young woman talked with her family, her friends and her work colleagues and some of these people she knew started using my brother to get their cars serviced and buy ‘new’ cars. 

b) Try out these cars and take the one that you like

A middle aged man bought a used car from my brother.  He looked it over, he drove it, he asked questions and my brother spelled out what was so about the car.  Several days later this chap rang up my brother to complain – something big had failed in the car and he was not happy.  My bother asked this man to come over and see him and he did. My brother looked over at the car and agreed with the man – that this should not have happened.  This took the man by surprising as he was expecting a ‘fight’.  “What would you like me to do?”.  The middle aged man responded “Fix it and give me a ring when it’s ready.”

At this point my brother showed this chap six cars and invited him to look them over, try them out and pick one.  Why?  The repairs on the man’s car would take some time and cost a considerable amount of money – it was simply not economical to repair the car.  The man was delighted, tried out several cars and picked one.  What did he say when he was leaving?  “I was expecting that you would be like all the others.  I was expecting a fight.  Instead you listened to me and did right by me.  I won’t forget.” What happened?

This middle aged man became a loyal customer.  He came back and bought a car for his wife and later one for his daughter.  Guess who services these cars?  My brother does.

Notice: it was possible to take a course of action that worked for the customer and for my brother. Let me share with you an important fact.  My brother has to be more ruthless than any  big business.  Why?  Because his is a small business – it involves him, his partner and two employees.  He does not have the luxury of a big bank account.

c) Treat me badly the first time then shame on you, treat me badly the second time and then shame on me!

Robert Axelrod in the Evolution of Cooperation shows that in tournament of tournament where many algorithms were playing with/against each other the best performing algorithm was/is ‘Tit for Tat’.  That is to to say the optimal ‘strategy’ for interacting with others is as follows: start out by trusting/cooperating and then reciprocate whatever the other party does.

One day a middle aged woman came to have her car serviced.  When she came at the end of the day to pick up the car she was not able to pay for it: she claimed that she had left her purse at home.  My brother told her that it was not a problem and that she could come back and pay him the next day.  So she drove off, happily, without paying and then didn’t come back to settle her bill.   At least not for some six months.

Six months later this woman turned up at my brothers garage for work on her car.  My brother remembered her and the unkept promise.  He reminded her that she had failed to keep her promise.  And he refused to work on her car until the bill was settled and she paid in advance for the work.  She made excuses (she had forgotten) and promised to pay at the end of the day – for everything.  My brother refused.  She left.  My brother told everyone of his contacts in the car business about this woman. Those that do know her or know of her refuse to do any work unless they are paid in advance.

Over the last eight years this is the only time, the only customer, who has taken advantage of my brother’s way of doing business: treat customers the same way that you would treat your mother, father, brother, sister and then ruthlessly apply ‘Tit for Tat’.

d) Zane’s Cycles and the lifetime service guarantee

In his book ‘Reinventing the Wheel’ Chris Zane share how he outmanoeuvred his formidable competition and built a brand and a successful business by doing something totally unheard of in the cycle business: offering every customer a lifetime service guarantee. What does this look like?

“… anyone who buys a bike from us can bring the bike back in for any needed tune-ups and repairs that result from everyday riding wear and tear for the entire life of the bike.  When we started the program back in 1995, opinion was split about it: our customers absolutely fell in love with it although my competitors and supposed experts were convinced it was going to lead me into bankruptcy.”

Caution: before you go out and offer a lifetime service guarantee apply the same rigor in analysis and operations that Chris did to be confident that is is a winning proposition rather than one that does lead to bankruptcy.

Incidentally, Zane Cycles is not the only business that does well by doing right by customers.  Another such business is Zappos.

Customer-Centricity is an orientation towards customers, but what kind of orientation?

Back to Colin and his perspective: customer-centricity is an orientation towards customers:

“We have always thought Customer centricity is about how you are ‘orientated’. For example if your boss asks you to work late, if you are family orientated you would say ‘no I need to get home and see the family’. If you are career orientated you would say ‘you are happy to work late’…..”

Let’s grapple with this and see how this measures up.  The behavioural school of economics (‘heuristics and biases) says that human beings have certain way of being in the world that leaves them open to taking courses of action that are not in their best interests.   This is illustrated in depth by Daniel Kahneman in his book ‘Thinking fast and slow’.  In the book ‘Nudge’, Richard Thaler and Cass Sunstein show how the ‘choice architecture’ – design/framing of choices – has a huge effect on human decisions and behaviour.  This leads to an interesting question and the heart of the ‘customer-centricity’ question as I see it.

Let’s imagine that you are customer oriented per Colin’s definition and you study the latest research into human decision making and behaviour.  You also get to know your customers in detail: wants, needs, decision making, behaviours, foibles ……. Now you are fully armed with all the insight that you need to design the ‘choice architecture.  And you are confronted with a choice: to design the ‘choice architecture’ so that you can make money by exploiting the weaknesses of your customers or design the choice architecture such that you help your customers to make the best choices for themselves?  Example:  mobile companies and plan/tariffs – do you make it so that your customers will pick plans/tariffs that are not right for them and make you money or do you genuinely strive to help your customers make the right choice for them?  Another example: health insurance plans.

As I see it this is where Colin and many other Customer gurus are silent. Some are not silent at all, they say that the whole point of all the Customer investments is to get information that allows you, the company, to ’tilt the table’ in your favour.

I am not in agreement with this point of view.  It strikes me as the same old wolf just that now he is disguised in sheep’s clothing because the little pigs got wise to the wolf.  What do you say?