Is customer-centricity going to lead you to ruin?
In this post I wish to respond to the assertions made by Sampson Lee in Customer-Centricity Is Not The Solution; Its The Problem. If I understand it Sampson is asserting that pursuing the path of customer-centricity is the road to ruin and his logic is as follows:
- To the customer, customer-centricity is ‘listening to me and satisfying my needs‘;
- Yet, it simply is not possible, due to limited resources, to satisfy the needs of all customers especially as different customers have different needs;
- Simple customer needs have already been met and meeting the needs of savvy ‘mature’ customers in developed markets is too costly; and
- Even if you manage to satisfy all the needs of all of your customers you are playing the same game as every other company and so you will end up being like everyone else – a commodity.
It occurs to me that Sampson has come up with a definition that suits his argument: he has collapsed responding to any customer’s requests/demands with being customer-centric. His assumption is customer-centricity = saying yes to whatever any customer wants. Is this the correct way to think about / orient oneself toward customer-centricity?
As a strategist, I say being customer-centric involves saying “No” as much as it involves saying “YES”, it involves doing some stuff excellently and other stuff not at all or badly. Customer-centricity approached strategically involves thinking and then making choices. Here are some of the most important choices:
- which people are we seeking as customers and importantly which people do we NOT want as customers;
- which jobs will we do for these customers and which jobs will we NOT do for these customers; and
- which needs/preferences will we fulfill with these jobs and which needs/preferences will we NOT fulfill.
This need to think strategically and make integrated design choices has been explored by Frances Frei and Anne Morriss in their book Uncommon Service. They label it “Truth Number 1: You Can’t Be Good at Everything”. The point that the authors are making is that a company can do well by being clear on the value proposition and then making a series of carefully chosen and carefully integrated trade-offs. Trade-offs are carefully considered choices: being great at the attributes that really matter to the chosen customers and being poor at that attributes that don’t matter.
Let’s make this real through the example of the Commerce Bank created by Vernon Hill. According to the authors:
- Hill focussed on those customers who were fed up with the service experience of a traditional bank especially the hours and the attitude.
- Commerce Bank chose to stay open 7 days a week. Monday through to Friday the bank was open from 7:30 am to 8:00 pm. And full service banking was available on Saturdays and Sundays thus earning Commerce Bank tagline of America’s most convenient bank.
- This kind of service is expensive and to pull it off Commerce Bank choose to pay the lowest rates on deposits in every market that the bank operated. Notice, that these go together: the great/convenient opening hours were made possible through the low deposit rates. How was the bank able to make this choice? Because it knew that its target customers were willing to sacrifice the deposit rate for convenience of opening hours and good service.
- Commerce Bank also made the choice to be the best at serving customers, interacting with customers. The bank found that hiring employees who are best in class in both attitude and competence is expensive. And expense it could not afford given its business model. So, Commerce Bank chose to hire employees with the right attitude – the people who naturally had the disposition and interpersonal skills to deliver great service.
- Yet hiring people with great attitude but limited technical skills has consequences. These people were not in a position to understand/explain the differences between 27 varieties of checking accounts, much less explain any complex financial products. To accommodate this design choice – hiring people with attitude but not aptitude – Commerce Bank simplified its product line into one product: a checking account.
To sum up: Commerce Bank become a great success by focussing on customers who valued opening hours/great service and were willing to sacrifice deposit rates. To deliver this value proposition Commerce Bank had to make integrated design choices. They choose to excel at what really mattered to these target customers (convenience, great service/attitude) and chose to do badly on the dimensions that did not matter to the target customers: price (deposit rates) and product range.
Can customer-centricity lead you to ruin as Sampson Lee claims? No, if you approach customer-centricity strategically and take the kind of approach that Commerce Bank took, or Amazon does, or SouthWest Airlines does, or John Lewis does. Yes, if you go about it the way that Sampson suggests you are going to go about it: do whatever your competitors is doing, follow the latest shiny object, or simply respond to whatever is the latest whim of any person that chooses to do business with you.
Posted on July 24, 2012, in Case Studies, Customer Philosophy, Customer Strategy, Leadership / Change / Transformation and tagged Commerce Bank, customer centricity, customer service, integrated design choices, Uncommon Service, value proposition. Bookmark the permalink. 5 Comments.