Can ‘externalities’ open up an actionable pathway to customer service, customer experience design and customer-centricity?

Are dead concepts limiting what shows up as customer service, customer experience and customer-centricity?

We are prisoners of dead concepts and mostly we are not present to this.

Look closely at what passes for customer services and the metaphor/concept that determine how it shows up is that of a factory (lowest cost factory) for handling/processing calls.  An even stronger metaphor/concept is that of waste processing.  Incoming calls land for enterprises like domestic waste lands for the local authorities – an undesirable obligation which costs money and should be done as cheaply as possible.

Look closely for most of what passes for customer experience design and it is interaction design – either at the point of interaction or across multiple points of interaction between the customer and the enterprise.

Look closely at customer-centricity and you find it is struggling because there is no guiding concept/metaphor that gives shape/substance to it.  Concepts and metaphors matter.  This got me thinking about ‘externalities’.

Let’s get acquainted with the concept of ‘externalities’

Here is the dictionary definition of ‘externality’:

An externality is an effect of a purchase or use decision by one set of parties on others who did not have a choice and whose interests were not taken into account.  Classic example of a negative externality: pollution, generated by some productive enterprise, and affecting others who had no choice and were probably not taken into account.  Example of a positive externality: Purchase a car of a certain model increases demand and thus availability for mechanics who know that kind of car, which improves the situation for others owning that model.”

How can the ‘externality’ concept help us improve the customer experience and cultivate customer-centric organisations?

I can speak about it in general terms or I can help you to see it for yourself through concrete examples:

Amazonhasn’t Amazon done away with many (if not all) of the negative externalities falling on customers though the taken for granted book buying model?  As a book customer you no longer have to pay the costs (time, effort, money) associated with getting to the bookshop, finding the right books, finding out that the book you are looking for is not there, wondering/worrying that the book is not any good, waiting to pay, carrying the books around and finally making your way back home.  Amazon did away with all of those costs falling on the customer.  And even introduced benefits like lower prices!

With ebooks Amazon has done away with the one disadvantage of buying books online – waiting for the booking to arrive.  Now you get the book there and then and you can read it on your PC, your tablet, your smartphone!

Furthermore, Amazon has focussed on operational excellence such that ‘no service is the best service’  – ensuring that the ‘system’ works so that the customer does not have to spend time/money/effort calling the Customer Services team.

Apple: hasn’t Apple done away with negative externalities falling on the customers whilst improving the customer’s lives? In the area of music the customer no longer has to make his way to the store, spend time finding the albums, buy an entire album when he only wanted to listen to two or three songs, queue up to pay, make his way home – all this before he can listen to the music. Apple did away with all that hassle and allow music lovers to buy the exact tracks and listen to them almost immediately.

If you look at the iPhone you will notice that traditional handset makers imposed a big negative externality on customers: their phones were hard to understand, set-up and use – the retail shops and the mobile operators were pretty unhelpful as well.  By taking on that work, upon itself, through great design Apple did away with that externality and at the same time introduced a benefit – a beautiful phone in terms of look and feel.  hasn’t done away with the negative externalities falling on corporate IT depts?  All the hassle, the work, the effort, the time involved in procuring, installing, configuring, maintaining and managing CRM systems?

Zappos: didn’t Zappos do away with the negative externalities falling  customers who were up for buying shoes from a unknown internet operator?  Next day delivery.  Return the shoes no questions asked.  Easy to get hold of and took with a friendly human being.  Furthermore, Zappos has used its Customer Services team to infuse/delivery happiness into the lives of the people calling its Customer Services team – providing a benefit that is highly appreciated by customers.

Build-A-Bear: the genesis of Build-A-Bear was the founder turning up with a friend and finding that they did not like any of the bears in stock.  Isn’t that a negative externality?  Going to the effort of going to the store and not finding what you want – nobody has what you want because everyone has pretty much the same standard product?  Build-A-Bear turned that negative externality into a positive customer experience – you, the customer, get to experience creating your own bear: the bear itself, the degree of stuffing (soft, firm), the clothes, the name for the bear…..

Easyjet: didn’t Easyjet do away with that negative externality called a ‘high price’ by stripping out all the stuff that ‘economy’ customers did not need and were prepared to ‘sacrifice’ in exchange for a lower price?  Please notice that the customers of low cost airlines such as Easyjet are willing to put in more effort to get the benefit they want a lower price.  So if you think customer-centricity / customer experience design is simply about reducing customer effort then you might want to think again!

A deeper inquiry into ‘externalities’

The hidden design of the ‘business as usual’ is to impose cost on people/depts/organisations that are seen as being ‘outsiders’.  So businesses impose externalities onto customers because, despite the fine sounding talk, business folks see customers as ‘outsiders’.  And one business dept/function imposes externalities on another dept/function in the same business.  Allow me to illustrate this:

  • The product folks make products that are not good enough because the externalities are borne by customers, the marketing function, the sales folks and the customer services function;
  • The marketing folks mislead customers because the externalities of this misleading are borne by customer, the sales folks and the customer services function;
  • The sales folks say and do whatever they need to do to make their sales numbers knowing that the externalities will fall on the customer, the logistics/operations function, the customer services function and the finance function;
  • The logistics folks don’t do their job right knowing that the externalities of not keeping their promise will fall on the customer (who cares if he has taken a day off work to be at home) and the customer services function;
  • The customer services folks don’t have any internal depts to burden with externalities so they burden customers with them by hiding their phone number, understaffing, not having people on staff who can accurately answer even the top 10 frequently asked questions, diverting customers to self-service (IVR, internet)….
  • The IT folks don’t pay sufficient attention to the needs of their internal customers (marketing, sales, service…..) because they know the externalities of their inattention, lack of care, will fall on internal depts and customers.

Summing up

I am convinced that if you grapple with ‘externalities’ that one dept imposes on another and which your business imposes on the customer then you have a powerful (actionable) pathway for making breakthroughs in customer service, customer experience, customer-centricity, customer loyalty and business performance.   On the other hand this might show up as ‘hard work’ so you might just want to stick with the ‘customer-centric’ messaging – it doesn’t do much for the customer yet it sure does sound great!

Author: Maz Iqbal

Experienced management consultant. Passionate about enabling customer-centricity by calling forth the best from those that work in the organisation and the intelligent application of digital technologies. Subject matter expert with regards to customer strategy, customer insight, customer experience (CX), customer relationship management (CRM), and relationship marketing. Working at the intersection of the Customer, the Enterprise (marketing, sales, service), and Technology.

3 thoughts on “Can ‘externalities’ open up an actionable pathway to customer service, customer experience design and customer-centricity?”

  1. An interesting perspective Maz, doesn’t it fundamentally come down to giving customers what they want and not giving them what they don’t?

    Your points about internal customers are very valid. For many managers the desire to shape their own internal fifedom, create a name for themselves and be “strategic” often overcomes any concerns about what their customers want. They are often just an irrelevance.



    1. Hello James

      Yes, it does come to that. And to get to that it involves using a wide angles lens to see the whole customer experience – even before the customer arrives at your premises and after he has departed. Most companies just don’t do that. Worse still in ‘sprucing up their front garden’ they end up ‘throwing the dirst in the customers garden’ and either don’t realise it or are happy with that.

      Ah, the joy of internal barons – you and I are in agreement. I’d go further and say that little will change until the design, silo-barons-competing agendas- is addressed. Why? Because the organisational design is what gives rise to organisational behaviour. And the key part of that is the barons and the competition between them.



  2. Hello Adrian

    No, I do not see it that way. As Jobs pointed out – customer are so stuck in the reality that they do not see what they want in terms of what is possible. Sometimes the people in business have insight into the leading edge of what is so and can project possibilities into the future and then make them real by acting powerfully right now, today.

    Today customers and the business folks take externalities for granted. Like everyone did until Bezos saw the future and manifested this future in the form of Amazon. Then, only then, did book buyers get what they had been missing. did the same – the incumbents (Siebel, SAP, Oracle) and their customers (IT Directors) were happy with the status quo. Benioff did a Bezons and the rest is history in the making – just recently Oracle (Siebel) lost its biggest customer (IBM) to a cloud based offer by SugarCRM.

    Sometimes the challenge is to see the future, create the future, enroll customers in the future and then get them in the bus with you and go for that ride. Too many companies are plain lazy: they are happy to sell you ‘food’ and ‘drinks’ whilst you are sitting at the bus stop called ‘as it is today’.

    As for internal depts – you and I are in total agreement.

    All the best


Comments are closed.

%d bloggers like this: