The three pillars of customer-centricity

There are countless articles and viewpoints on what constitutes customer-centricity. I find most of the published viewpoints simplistic, confusing, contradictory, lopsided or simply self-serving.   Which is why I am pleased to have rediscovered Professor Mohan Sawhney.   I urge you to watch the following video. 

Here are the key points that I have taken away from this video and others (by Prof. Sawhney) when it comes to customer-centricity:

To grasp customer-centricity it is important to visit product-centricity

A product-centric organisation is one that thinks in terms of products.  Focusses it efforts on making and selling products.  Organises itself around products e.g. product centred business units.  And it measures and defines it success in product terms including product sales (units), product revenues, product market share etc.

There is a good reason for product-centricity.  Many great companies are founded on a great product e.g. Dyson and Apple.  The downside is that product-centricity lures the company into building better mousetraps rather than looking at it from the customer’s perspective: no mice.

Customer-centricity is founded on a belief and rests on 3 pillars

The foundation of customer-centricity is a belief.  The belief is that the organisations reason for being (existence) and it’s success if based on three pillars:

  • Superior understanding of customers needs, wants, desires, motives and behaviours;
  • Converting this customer insight into superior (compelling) value propositions; and
  • Crafting and delivering a superior customer experience.

A customer-centric organisation puts customers ahead of it’s products and priorities

What are the defining features of a customer-centric organisation?  Prof. Sawhney highlights three features:

  • Values and actively solicits customer input – to get better understanding of customers, to co-create better value propositions and to improve the customer experience;
  • Puts customers ahead of the organisations products and priorities; and
  • Continuous focus on improving the experience that customers have with the organisation and its partners.

The challenge of being customer-centric comes down to leaders being customer-centric

So what does it take to be customer-centric?  This is what Prof. Sawhney says:

  • “Ingraining these beliefs and acting and thinking on this central mission is what customer-centricity is about”;
  • “But perhaps what is most important …. is a culture and a leadership that really puts the customer first”;
  • “And believes that the customer is at the centre of what we do”; and
  • And if it ever comes to a choice between what is right for the company and what is right for the customer you will always choose and put the customer first.”

What does this kind of leadership look like? 

In March 2003, with a flip of the switch the Zappos leadership team terminated a part of the business (‘drop ship’) that accounted for 25% ($16m) of revenues and was “easy money”.  What makes this amazing is that Zappos was fast running out of money and this 25% of the business was the bit of the business that was easy money!  It was easy money in the sense that it did not tie up Zappos cash because Zappos simply took the order and the shoe suppliers fulfilled the order.  What was the immediate impact of making this move?  In Tony Hsieh’s words: “Now we had to figure out how to make next week’s payroll”.  If you are interested that sentence is on page 124 of “Delivering Happiness A Path to Profits, Passion and Purpose”

Taking this decision did not deliver ROI.  It took guts to flip that switch and make a bleak situation that much more difficult.  So why did the Zappos leadership team do that?  Because of their commitment to a bold vision of having Zappos be the brand that is renowned for the very best service.    The drop-ship business whilst keeping Zappos afloat was also the business that resulted in unhappy and disappointed customers.

Customer-centric businesses are rare

Prof.  Sawhney points out that customer-centric businesses are rare – they are the exception.  Why?  Because people like Tony Hsieh (the CEO of Zappos) are rare.

Why companies are struggling (and will continue to struggle) in cultivating customer loyalty

Only 17% of companies scored ‘strong’ or ‘very strong’ on customer loyalty

I read the following post – ‘Customer loyalty – does anyone care? and that got me thinking.  The author is highlighting the research carried out by the Temkin Group that shows that only 17% (24) of the 143 companies surveyed scored a ‘strong’ or ‘very strong’ loyalty’ rating.

Many underestimate what it takes to be strong/very strong in customer loyalty

In my opinion a lot of people who write on customer experience, customer loyalty and customer-centricity simply do not get how hard it is for large established companies to deliver on this stuff.  For these companies becoming customer-centric, delivering a great experience and generating loyalty is as likely as goals in the average soccer match – a rare event. Why is that?

An old quote that sheds light on the matter

There is a really good quote that gets to the heart of the matter, let me share it with you:

” A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it”   Max Planck

What am I saying?  I am saying that a big change in the customer-centric direction is highly unlikely until there are changes in the following domains:  business models, business leaders, management mindset and organisational structure.

Plenty of companies are doing well without being customer centric or delivering great customer experience

The fact is that plenty of companies do well without being customer-centric.  I explored this topic in the following post: Who says you have to be customer-centric to thrive

You can do well because you have strategic assets and I gave an example here: Bewleys shows that an organisation with strategic assets can deliver a poor customer experience and get away with it.

Existing business models are a huge obstacle in generating customer loyalty

I explored the issue of business models and how they get in the way of any customer-centric initiatives in the following post: ‘Contrary to popular opinion it is easy to become customer centred’

The organisational climate – mindset, culture, structure – is another big obstacle

If you are a gardener you will know that you simply cannot throw seeds anywhere and expect them to sprout into healthy, tall plants.  It is the same with organisations.  The way that organisations are structured, led and managed has a big influence on what kind of initiatives flourish and which struggle to take root.  I explored this in the following posts:

Do the customer experience designers have what it takes to design experiences that generate loyalty?

And finally I took a look at the customer experience designers themselves and questioned whether they have what it takes to actually design customer experience that work for customers: The problem with Customer Experience is the designers

Conclusion: the heart of the challenge is  leadership and ‘change management’

The heart of the challenge in cultivating customer loyalty is one of leadership and change management.  Specifically, giving up the existing ways of thinking about, organising and doing business.

This challenge is a difficult one at the best of times.  It is especially difficult when the people who have to change are the people at the top of the organisation.  Yet there is good news:  Gerstner managed to bring about a transformation at IBM.  It helped that he really had nothing to lose as IBM was a basket case and headed for oblivion!

Does marketing deserve a seat at the Customer Experience and Customer Centricity tables?

I believe that the marketing function has a valuable role to play in customer experience and customer-centricity

In the Customer Experience and Customer Centricity communities I have noticed a certain dismissive attitude towards the role and contribution that the marketing (and advertising)  folks can and do make.  To some extent this is not a surprise as some of the most visible proponents of Customer Experience come from a customer services background. Others who share this dismissive attitude tend to come from an operational improvement background and are deeply embedded in process thinking – the engineering mindset.

Whilst I can see the shortcomings, I can also see the value of the marketing function and the contribution it can, does and needs to make: to the customer centric orientation and to the customer experience in particular.   Recently I made my point of view clear on a Linkedin conversation:

“The companies that have marginalized the marketing function are making a big mistake. In my experience, the folks working in the marketing and advertising arena are one of the few tribes that truly get the emotional nature of human beings. The best marketers get the impact of standing for something that resonates with human beings. They get the importance of symbols and how these move human beings. And they get the importance of beauty. They know how to touch upon the emotional, engage and move human beings. Customer Experience requires the harmonious integration between the rational and the emotional.”

There are plenty of people who disagree with my point of view

I was not at all surprised that my comment on Linkedin resulted in the following response – a response that I believe is representative of many working in the CE and customer-centric communities:

“Regarding marketing losing its place at the table in customer-centric companies, had marketing exhibited the skills and behaviors you describe often enough, marketing still would be at the table. However, as an overall profession, marketing is far better at promoting to people than communicating with them. “Understanding” customers isn’t sufficient. In customer-centricity, companies have to see through customer eyes, rather than understand how to look at customers.”

Does this response raise a valid issue?  Absolutely.  Is it an accurate description of marketing?  Let me share an example with you and then you can decide for yourself.

Lets examine the issue through a concrete example: my wife and Tesco

My wife used to shop regularly and almost exclusively at Tesco (the biggest supermarket chain in the UK) and made frequent use of their online shopping and home delivery service.

Over the last three months she has shopped less frequently, bought less and spent less with Tesco.  In part this is simply because she is travelling more and finds other supermarket chains (Sainsburys, Morrisons, Asda) more convenient.  It is partly because she is being more frugal.  And it is partly because she had a disappointing experience at a Tesco store: Why my wife will not be relying on Tesco….

On the 24th March 2011 my wife received the following email (I have extracted some information from this email to shorten its length) from the Tesco.com marketing team:

www.tesco.com
If you haven’t shopped online for weeks. 

Don’t worry.

All your favourites are still here.

So you can fill your basket in minutes.

 

£7.50 off
Start Shopping >> e
Dear Mrs Iqbal,  

We’ve noticed that you haven’t placed a grocery shop with us for a while, and we hope that we haven’t let you down.

Please don’t forget how easy and convenient it is to shop online.  All the purchases you’ve made online and in-store are still kept in ‘My Favourites’.

And because we’d really like to welcome you back, we’ll give you £7.50 off your next grocery order when you spend £75 or more.

eCoupon code:
Valid on deliveries up to and including 2nd April 2011.

So why not let us do your shopping for you again soon?

Best wishes,

Kendra Banks
Kendra Banks
Marketing Director
Tesco.com

 

Browse Tesco.com
Double Clubcard points still on; Spend £1, Collect 2 points, Every 150 points = £1.50
Award Winning Service

What impact does this email have on you?  Does this piece of marketing produced by the marketing function improve or degrade your experience, your perception, your attitude towards Tesco?

How has my wife experienced this communication from the Tesco marketing team?

My wife is pleasantly surprised that Tesco noticed that she has shopped and spent less with Tesco. How is she left feeling towards Tesco as a result of this marketing communication?

She says “It makes me feel valued as a customer.  I matter to them and they want me back.  And Tesco is providing value to me as their customer by giving me £7.50 off my next order.  I know it is not a huge amount, yet it does matter that they are giving me this discount.”

What other impact has this email from the marketing function made on my wife?  She is left thinking that Tesco:

  • Is a professional company that is on top of things because they noticed a change in her shopping behaviour;
  • Is proactive because Tesco has taken the first step to recover / ignite the previous shopping behaviour; and
  • Tesco is simple (as in easy to do business with) and straight with its customers because the email is written in that way – no fluff, no gimmicks, no tricks.

You might say great, but has she actually made any behaviour changes?  The answer is yes – she is once again shopping and spending more with Tesco.  And all because of a single email from Tesco’s marketing team.

So what is the lesson?

Marketing matters, the marketing function matters because it touches the customer in so many ways.  And if your marketing function is not making the kind of impact that the Tesco marketing function is making then it is time to learn from Tesco (and others who practice good marketing).

Disclosure: I am a member of the Institute of Direct Marketing and thus possibly biassed!

6 reasons why companies continue to struggle with customer centricity

I can think of six reasons why many publicly quoted companies continue to make slow, painful, progress towards customer centricity:

  • They are publicly listed enterprises and they are expected to be shareholder centric not customer centric;
  • They make a significant part of their revenues and profits at the expense of their customers and are not willing to forgo the practices that deliver these ‘bad profits’;
  • They are designed to make and sell standard products not to create and deliver customer experiences;
  • They are structured into silos and each silo has its own agenda, priorities and metrics that makes it rather difficult to play the joined up game of customer experience;
  • The Tops are totally divorced from the day to day reality of the way that the organisation works (just watch Undercover Boss); and
  • They seem to believe that customer centricity lies in the realm of the marketing function rather than a total transformation in business philosophy, corporate strategy, management mindset and organisational design.

What do you think?

Better World Books: great example of customer centricity being practiced

I am curious about all kinds of stuff – that means buying quite a few books.  So recently I placed a number of book order from various Amazon partners – one of which is Better World Books.  Before they were invisible to me and now they are firmly in the limelight.  All because they sent me an email last week that simply stopped me in my tracks.  Here is that email:  Better World Books email.

Their email to me is a great example of customer-centricity.  Better World Books have taken the time to put themselves in my shoes and respond to my needs even before I realised I had those needs!  Specifically, they have:

  • anticipated a situation that is likely to get in the way of delivering on their promise and thus result in a poor customer experience;
  • written to let me know that there is a problem and explained what is causing the problems;
  • apologised for any impact that this situation – which is outside of their control – may have on me; and
  • given me sensible options – stick with them or to cancel the order.

The other noteworthy points are:

  • the tone of the email is just right – it is written in a friendly conversational – human – tone;
  • they have supplied their email address and encouraged me to get in touch with them if  I have concerns or questions; and
  • they have done their best to remind me to take circumstances into account when I rate them on Amazon – clearly this is a company that gets the importance of ratings on future business.

Now here is the thing.  I do not know if Better World Books has a customer strategy or not.  I do not know if they have CRM technology or not.  I do not know if they have optimal business processes etc.  Nor, as a customer, do I care.  What I care about is how they treat me, how they leave me feeling.  In my case I am feeling great about doing business with Better World Books.  And I think that their name is apt – they have helped to make my world better.

Next time I am faced with a choice as to who to buy from Better World Books will be top of mind and most importantly top of heart.

You don’t find Customer in the P&L or in the Balance Sheet

I don’t publicise the fact that I started out in accountancy and finance – in fact as a Chartered Accountant I am a member of the Institute of Chartered Accountants in England & Wales.

Now I have been wrestling with the a problem: despite all the talk of customers being in the driving seat and the need for companies to be customer focussed and/or customer centred, it is truly hard to find more than a handful of companies that are customer focussed and even less that are customer centred.  Why?

Whilst grappling with this question two thoughts came to me and they are both related to finance.

The first is that I remember a friend from the venture capital community telling me that the way venture capitalists directed/managed the companies they owned could best be described as “management by Excel”.  What he meant was that the VCs determined what price they wanted to sell the business and at what time.  Once they had decided this the plugged some figures into an Excel sheet and that told the senior management (CEO and fellow directors) of the company what revenue and profit figures had to be delivered each year.  The rest – what actions were taken or not taken to make these numbers – was entirely up to the senior management.

The second thought that occurs to me is that in all of my time preparing and analysing the P&L and the Balance Sheet I never came across the term customers.  There is no value given to customer relationship in the P&L or the Balance Sheet.  There is no value associated with customer equity.  There is no value given to being customer-centric.  Customers simply do not exist in the language of finance.  Neither do employees.

I have read that the Eskimos have tens of words for snow because snow – all the different types – really matters to the survival and well-being of Eskimos. In the English language we have only one word for snow as it relatively unimportant.  In the language of finance (P&L, Balance Sheet) there are no words for Customer – that tells you all that you need to know.

The overwhelming majority of companies will continue to focus on making this years numbers by any means.  If one of those means is to be customer focussed then the company will become customer focussed – for that financial year.  If making the numbers means reducing quality of product or quality of service then those means will be used.  What matters is making this years revenue, profit, cashflow and EBITA numbers.

Or to put it differently in the real world of business, customers and employees are simply means to a higher cause: making the financial numbers.  Can this kind of organisation ever be described as being customer centred?  I’ll let you decide.