Is this the most serious misunderstanding plaguing customer-centricity?

Misunderstanding, reality and narrative

There are so many misunderstandings around customer-centricity that it is hard for me to know where to start.  In this post, I want to deal with a particularly dangerous and widespread misunderstanding.  Some of you have led yourself to that misunderstanding after reading my last post on customer-centricity.  Before I deal with this misunderstanding I want to draw your attention to the following:

Reality is amenable to and readily supports any narrative that we place on it.  Once upon a time the narrative was the earth is flat.  Later the narrative changed to the world is round.  Once upon a time there were witches in the world, now, at least in the West, there are no witches.  For a little while the narrative was almost all of the DNA in the human genome was junk DNA.  Today the narrative is that vast majority of so called ‘junk DNA’ is essential to and involved in key biochemical processes.  I hope you get what I  am getting at.

No single definition and/or ‘understanding’ of customer-centricity will exhaust customer-centricity.   Put differently, customer-centricity seems so obvious until you really grapple with it.  And when you grapple with it all kinds of stuff shows up – some of it rather surprising.  Furthermore, what shows up as customer-centric in one context may not show up as customer-centric another context.

With that out of the way and the context set, lets grapple with this misunderstanding.

To be customer-centric you have to be nice and give you customers what they are asking for

Far too many people confuse customer-centricity with doing what the customer wants, giving the customer what he wants, and being ‘nice’. Some go further and equate customer-centricity with being a patsy, a pushover. I say this is the most serious misunderstanding plaguing customer-centricity. 

Why is it so dangerous?  First, there are the people who understand customer-centricity this way and for them it shows up as unrealistic and distasteful.  Given this way of understanding customer-centricity they dismiss it and/or want nothing to do with it.  Second, there are a different group of people who speak and act as if customer-centricity is as simple as giving the customer whatever he asks for.

Customer-Centricity is neither this simple nor this simplistic

To both of these groups of people I say that you are mistaken.  You’re mistaken, badly mistaken.  Customer-centricity is neither that simple nor that simplistic.

I say that being customer-centric is a stand that you take and not a fixed set of behaviours.  What kind of stand am I talking about?  The kind of stand that says that the only acceptable profit is that made by creating genuine value for customers.  It means letting go of existing policies and practices that enrich the company at the expense of customers  – ‘bad profits’. Taking the customer-centric stand is not possible without courage.  The kind of courage Tony Hsieh and the Zappos management team showed when the business was in deep trouble financially and they gave up a lucrative source of revenue, profits and cash because it did not fit with their vision and stand to be the brand renowned for great customer service.

I say that being customer-centric is as much about being proactive in coming up with new products/services/experiences that you believe will create value for customers as it is about reacting to what customers say/ask for.  As I write this Apple/Steve Jobs/iPod/iTunes/iPhone/iPad come to mind immediately.  Or think of Amazon, ebooks and the Kindle.

I say that being customer-centric is as much about influencing/persuading customers as it is listening to/obeying customers.  Yes, there is a role for the right advertising, marketing and selling.  Customers are human beings and they do not necessarily know what is best for them.  Even if they do know, customers often do not do what is best for their well-being.  This is where you can use insights into the human functioning to come up with a design that nudges the customer towards the right behaviour.  It is also where something more forceful than a nudge can be necessary.  Again I cannot help but think about how Jobs handled the antenna/signal reception issue around the iPhone.  Or think about how Zappos persuaded shoe buyers that it was OK to buy shoes online without trying them on.

I say that customer-centricity only makes sense in a particular context and as such being customer-centric requires a “yes” when it is appropriate to say “yes” and a “no” when it is appropriate to say “no”.  This point was the key point made by Frances Frei and Anne Morriss in their book Uncommon Service.  As they say “you have to be bad in the service of good”.  They talk at some length about Commerce Bank: to be great at convenience and service Commerce Bank chose to only offer one banking product (checking account) and paid the worst rates of any bank in the market place.   Look, if you turn up at my Mercedes dealership and want to pay Ford prices then the most ‘customer-centric’ behaviour is for me to drive you to the nearest Ford dealership!  Furthermore, sometimes a “no” is simply in the best interests of your customer even if he does not know it.  This was the point I was making in this earlier post.

I say a lot.  What do you say? If you the situation at hand differently to me then speak up and share your understanding.

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.