Howard Schultz/Starbucks: 18 insights and lessons from a customer experience master

It is worth learning from the masters

You may have noticed that I am an avid student of all things customer.  Over the last few months I have been reading Onward by Howard Schultz and I have found it to be an insightful and inspiring read – I recommend you buy it and read it!

Perhaps, I love the book because it validates my point of view (bias) on customer-centricity and customer experience – as a philosophy rather than a strategy or simply tactics (I’ll get into that distinction in a follow up post).  For today I simply want to share with you some stuff in the book that resonated with me in the hope that you may find it useful too (any stuff in bold is my doing).

18 insights / lessons from Howard Schultz

“A well built brand is the culmination of intangibles that do not directly flow to the revenue or profitability of a company, but contribute to its texture. Forsaking them can take a subtle, collective toll.” (p23)

“I always say that Starbucks is at its best when we are creating enduring relationships and personal connections. It is the essence of our brand, but not simple to achieve. Many layers go into eliciting such an emotional response.  Starbucks is intensely personal.” (p23)

“Unlike other brands, Starbucks was not built through marketing and traditional advertising.  We succeed by creating and experience that comes to life, in large part, because of how we treat our people, how we treat our farmers, our customers, and how we give back to the communities.  Inside the company, there had always been an unspoken level of trust….” (p27)

“I suggested something to the group as the ideas began to percolate. “The only filters to our thinking should be: Will it make our people proud? Will it make the customer experience better? And will it enhance Starbucks in the minds and hearts of our customers?”” (p75)

In my head I knew that no silver bullet would transform Starbucks overnight, but in my heart I was on the lookout for a big idea – what would be the next Frappucino, the most successful new product in Starbucks’ history?” (p75)

“But there was an even more important reason that I chose to eliminate comps from our quarterly reporting. They were a dangerous enemy in the battle to transform the company…….The fruits of this comp effect could be seen in seemingly small details. Once I walked into a store and was appalled by the proliferation of stuffed animals for sale.  “What is this?”  I asked the store manager in frustration…..The manager didn’t blink. “They’re great for incremental sales and have a big gross margin.” This was the type of mentality that had become pervasive. And dangerous.” (p89)

“In any well run retail business, there is, by definition, a maniacal focus on details……..In 2008 I felt very strongly that many of us had lost our attention to the details of our business…..Like a doctor who measures a patient’s height and weight every year without checking blood pressure without checking blood pressure or heart rate, Starbucks was not diagnosing itself at a level of detail that would help ensure its long-term health….We thought in terms of millions of customers and thousands of stores instead of one customer, one partner and one coffee at a time. We forgot that “ones” add up.” (p97

Their instruction at this “seeing” exercise was to consider each retail experience not as a merchant or an operator, but from the point of view of the customer. What did they witness, smell and hear? What non-verbal cues enhanced the experience? ……That journey helped put our leaders back in customers’ shoes, providing an enlightening and for some emotional exercise that underscored how important it was to put the customer at the centre of every meeting and business decision.” (p107)

“Starbucks coffee is exceptional, yes, but emotional connection is our true value proposition.  This is a subtle concept, often too subtle for many businesspeople to replicate or cynics to appreciate. Where is emotion’s return on investment? they want to know. To me, the answer is clear: When partners like Sandie feel proud of our company – because of their trust in the company, because of our values, because of how they are treated, because of how they treat others, because of our ethical practices – they willingly elevate the experience of each other and customers, one cup at a time.” (p115)

I have always believed that innovation is about rethinking the nature of relationships, not just rethinking products and as Michael explained how Ideastorm was helping Dell listen to customers and improv its products and services…..Thee was definately something here for Starbucks.  A chance to reconnect with customers we had lost touch with.” (p120)

“..one of the most important pieces of advice I’d heard upon my return…….”Protect and preserve your core customers.”…..”The cost of losing your core customers and trying to get them back in a down economy will be much greater than the cost of investing in them and trying to keep them.“” (p129)

“Some corporations are built, or rebuilt, on data driven business plans and hired guns with formulaic strategies. They may succeed, but they lack soul.  Starbucks is, by its founding nature, different……..transformation was not only about tightening nuts and boltsIf we did not also feel, if we did not have conviction in our values and believe that we really were in the business of human connection – on our farms, in our offices, in our stores, in our communities – then we were doomed.  We had to preserve our humanity.” (p131)

“But what many or our people had in spirit they lacked in business acumen and tools…….We also observed too much waste…….Something subtler was being wasted: our people’s time and energy……The fault did not lie with our people in the stores.  They were doing the jobs they had been asked to do with the resources and training they’d been given.  For all the brand’s marketing success, Starbucks needed a more disciplined operations system…..” (p145)

Growth had been a carcinogen. When it became our primary operating principle, it diverted attention from revenue and cost saving opportunities, and we did not effectively manage expenses……..Then as consumers cut their spending, we faced a lethal combination – rising costs and sinking sales – which meant Starbucks economic model was no longer viable.” (p149)

“As I stared at the list of 600, a lesson resonated: Success is not sustainable if it’s defined by how big you become.  Large numbers that once captivated me – 40,000 stores – are not what matter. The only number that matters is “one”. One cup. One customer. One partner. One experience at a time. We had to get back to what mattered most.” (p152)

“Kristen summed up Lean’s benefit well: “We were spending too much of our time fixing moments , but not actually solving problems. But fixing moments, like mopping a dirty floor, only provides short-term satisfaction.  But take the time to understand the problem – like how to keep a floor from getting so dirty in the first place – solves, and maybe eliminates a problem for the long term.”” (p278)

“At it’s core, I believe leadership is about instilling confidence in others..” (p302)

“There are companies that operate huge global networks of retail stores, like us.  Others distribute their products on grocery shelves all over the world, like us.  And a few do an extraordinary job of building emotional connections with their customers, as we have learned to do.” (p311)

My recommendation

Buy the book – it is a great read and has lots of real world lessons and insights.  For most business people it is likely to be a challenge because Starbucks is Starbucks because it is not built on nor operates on conventional business wisdom and practices.

How the AA excels at delivering the perfect service experience – 11 lessons (Part II)

This post completes the conversation that I started in Part I of this post which you can find here.

11 lessons for crafting a perfect service experience

1: make it easy for your customers to get access to your contact details so that it occurs (to your customers) as no effort at all.  Yes, you can put the number on all of your existing interaction channels.  Can you go further and issue a membership card like the AA does and give the key details including the contact number on that one card? Why not build an app for that?  Yes so that the smartphone user just hits the app and the app does all the work?

2: make it easy for customers to get through to a friendly human voice.  First and foremost it means having the right number of people available to take calls.  And instead of unhelpful messages like “we are experiencing high call volumes”, “check out our website”, “your call is important to us” do something useful.  For example, let the customer know where he is in the queue and how long he is likely to have to wait.  Better still use technology to ring the customer back – when his turn comes up – so that he can do something useful with his time.  My colleagues in the customer management community tell me that the technology to do this exists.  What is missing is the will to do it.

3: use the information that is available to you to make the customer’s life easier.  For example, the AA have clearly sourced vehicle data from the DVLA (Driver and Vehicle Licensing Authority) and so I simply had to provide the registration number rather than spell out the details of the car.  This saved us both time and the AA probably had better data on the vehicle than I would have been able to provide.  Incidentally, most organisations can a lot better in this area.

4: make specific, measurable, commitments like the AA lady did when she said that someone will be with you within 1 hour.  When you make nice sounding vague statements I, the customer, simply do not believe you.  When you make specific commitments – especially in a measured, confident tone – then you inspire my confidence in you.  What is more, you reduce my uncertainty, I know what to expect and when and so I can better manage my time, myself.  Specific commitments reduce uncertainty (and risk) in the customer’s mind replacing it with a certain piece of mind – a highly desired state.  

5: conduct a human conversation and look for opportunities to acknowledge and validate your customer.  Let’s face it most of us (if not all of us) experience a surge of joy and affinity when someone who matters to us acknowledges and validates us.  Plenty of people turn to counsellors to experience that feeling.  So imagine the emotional connection you build with your customers when you treat them that way.  Incidentally, that way of treating customers is the ultimately way of letting your customers know that you respect them. The AA lady excelled when she thanked me for offering to take a back seat if someone needed the AA more than me.  It is not just what she said it was the way that she said – genuine surprise and delight.  Incidentally, you cannot conduct a human conversation if you are keen to get them off the phone.  That has the same effect as talking with someone and noticing that he keeps looking at his watch and over your shoulder towards someone else.

6: honour your word.  No doubt you are familiar with “under promise, over deliver” – that is great if your promise is acceptable to the customer.  Yet many times it is not like the companies that quote 2 days to respond to your email when we expect a response in several hours.  The other aspect is that you can honor your word even when you cannot keep your promise.  How?  As soon as you figure out that you are not in a position to keep your word then contact your customer, explain the situation and sort out the mess.  You can only sort out the mess by asking the customer “How can I make this right by you so that we can move beyond this with no hard feelings?”    Incidentally the best way of you losing my respect is for you to repeatedly break your word – to me or to my fellows (think social media and social networks).  Incidentally, honouring your word is all or nothing affair rather like being pregnant – you cannot be half pregnant.

7: do the job that the customer has hired you to do – deliver the desired outcome.  Did I value Andy’s friendly manner?  Yes.  Did I value Andy’ s knowledge of cars? Yes. Yet neither of those attributes would have had made up for my car being stuck on the drive.  The fact is that this was a great experience because Andy got the job done.  He (and so the AA) delivered the outcome that I had hired the AA for when I had joined as a member: my car was working and I was mobile once more. 

8: take the opportunity to educate your customers.  If the customer turns to you to get a job done then it is likely that you have some knowledge that you can share that will leave the customer better off.  For example, if you are selling shoes then you can suggest tips on how the customer can best take care of those shoes.  In my case Andy told me that my car, an old Mercedes, is prone to the kind of problem I encountered if it is started and then not drive for some 10 minutes or so.  So his tip if you start the engine then leave it running for 10 minutes or so.  This is another major failing and an area in which organisations can easily improve if they put their heart into it (I will be writing on this later).

9: no matter what technical job you are doing remember that there is always a human job – to make sure that your customer feels great about doing business with you.  Too often we get wrapped up in the technical task and forget about our flesh and blood human beings.  Andy (and the AA) did not make that mistake.  Andy was wearing the right clothes, he was clean, he smiled and talked with me.  Specifically, he used my language and asked me simple questions that I could answer.  He told me what he was doing.  And most importantly he did not do anything to make me feel foolish.  Even when I felt foolish and apologised Andy reassured me and by doing so he helped shore up my self-esteem rather than diminish it.  If the “experience” bit means anything it means pay attention to the human being and his subjective experience throughout the encounter

10:  there is no substitute for genuinely caring about your customers (and your role).  When you genuinely care about your customers then that becomes part of your DNA and manifests itself in everything that you do.  In every single interaction that I have had with the AA I have been left with the experience that the AA folks care about me (their customer) and the job that they are doing.  The ultimate act of caring was the way that Andy ended the encounter: “We’re here to help you!”  I took that to mean “Don’t feel bad about calling me out over a flooded engine that I fixed in two minutes.  My job, our job, is to help you – whatever help you need big or small!”  He didn’t say that in words because he did not have to – he said it in his whole being from the moment that I met him at the door to the time that he left.  You can’t fake Being.  Yet too many companies that are embarked on the customer bandwagon are doing their best to fake it.

11: the customer facing staff can put on a beautiful show and deliver a great experience to the extent that the backstage people do their work.  One of my sons loves to sing and is in a choir that sang at the Proms (this is a major annual event in the UK) recently.  I can tell you that it took a lot of planning and practice to plan and pull of that event.  It requires a dedication to the cause such that all the details are taken care of.  Too many customer experience folks are focussing on the performers on the stage (and the play) and yet not paying the right level of attention to the backstage: the people, the propos…….As the AA has the Which? award for two years running that suggests that it has taken care of the whole package – the performers on the stage and the stuff backstage.  Who are the most important backstage people?  The people at the top (The Tops) who ultimately set direction, shape culture and management style, make investment decisions, set up KPI’s……….

Why culture is the ‘Achilles Heel’ of your customer experience efforts (Part II)

This post concludes the train of thought that I shared in an earlier post – Why culture is the Achilles Heel of your customer experience efforts (Part I). – I encourage you to read it to get the most out of this post.

Let’s forget morality and focus on ‘workability’.  By ‘workability’ I am addressing the pragmatic dimension.  For example if you want to fly a 747 from London to New York you simply need an airworthy aeroplane, the right fuel, experienced pilots, the right staff etc – these are the conditions of workability for the flight.  If you do not have these in place then your plane may get off the ground but it is highly likely to make it to New York.  So what are the conditions of workability for a customer-centric orientation that builds customer loyalty?

The foundation of customer loyalty is earning and cultivating trust

In a world full of suppliers who offer pretty much the same goods who would you choose to do business with?  If you are like most of humanity then you will instinctively do business with the one that you trust the most. Don Peppers & Martha Rogers have taken a good look at the whole trust thing in their book ‘Rules to Break & Laws to Follow’.  So allow me to share their wisdom with you.  Here are the laws that they recommend that you follow:

1. Earn and keep the trust of your customers

The key point I want to stress here is the word ‘earn’.  Yes, you need to earn it by doing the right thing (honest, fairness, integrity) as well as doing things right (competence, ease, access, efficiency…).  It means paying as much attention to the social and moral aspects as it does the economic aspect. Are you a fit and proper person/organisation?  Which is another way of asking: can you be trusted to act honorably/ethically?

2. Really taking your customer’s point of view means treating each customer with the fairness you would want if you were the customer.

At a philosophical level you can look at this either through John Rawls veil of ignorance or refer to some of the oldest philosophies used to guide human relations.  Using the lens of the ‘veil of ignorance’ ask yourself how would I design the system (roles, rules, interactions….) if I did not know if I would end up playing the role of the customer or the enterprise?  I used to use this with my two children when they would quarrel over cake: one of them got to cut the cake into two pieces and then the other one got to choose (first) which slice he wanted.  This system ensured fairness.

If we turn towards the world’s great religions then with Christianity you have the Golden Rule.  Rabbi Hillel when asked about the Torah replied “Do not do unto others that which is hateful to you, the rest is merely commentary.” Confucius stated “What you do not wish upon yourself, extend not  to others.”  Mohammed said “None of your truly believe until he loves for his brother what he loves for himself.” And in the holy book (Mahabharata) of the oldest religion (Hinduism) you have “This is the sum of duty: do naught unto others what you would not have them do unto you.”

At a practical level it means taking off your shoes and walking the shoes of your customers.  It means experiencing how it feels to pick a mobile phone plan when there are so many to choose from, so many conditions, so many variables?  It means experiencing what it is like to set-up and use the product with instructions that occurs as being useless?  It means experiencing what it is like not to be able to get hold of  helpful human being when you have an urgent need and having to navigate a ‘hard to make sense of’ IVR and so forth.  Not reading a report about it – actually experiencing it by doing it for real.

Don and Martha say it best when they write:

  • Honestly taking the customer’s perspective is really at the heart of understanding the customer’s experience with your brand or product.”
  • “…the very concept of being trustworthy that the company will not be acting solely in it’s own short-term interests.  On one level, this might involve simply giving a customer a fairer deal than she would otherwise have know about.  Or it could mean providing the information to allow her to compare competing offers directly – your competitors best offers included. It might mean being completely open with the customer when talking to her about the merits of buying a product or service….”

3. To earn your customers’ trust, first earn your employees trust.

Your employees can be the source of customer insight, competitor intelligence, ideas, creativity, innovation and judgement.  They are also the source of flexibility: they can judge the situation and respond appropriately.  And there is world of difference between giving the minimum and put our ‘heart and soul’ into your work.  The difference is called ‘discretionary effort’.  Tapping into it is like tapping into an inexhaustible gold mine.  Still not convinced?  Name one technology, one artifact, that has not been ultimately created by a person or persons working as a group.

If you want your employers to treat your customers well you have to model that behaviour: you have to treat your employees well.  In services heavy industries (such as retail, telecommunications, hotels & leisure…) your employees are absolutely critical to any form of service excellence.  To earn the trust of customers you absolutely have to earn the trust of your employees.  You do that by treating them well:  the ‘veil of ignorance’ and the Golden rule applies just as much to your employees as it does to your customers.

You would be wise if you were to apply this ethic to your suppliers and your partners.  I have been a supplier of professional services for most of my working life and my teams have given our all to those clients who have practiced the golden rule.  The rest – we stuck to the contract and did the minimum we had to do.  When disaster strikes your suppliers/partners can be your saviours or the source of your ultimate destruction: more than one company has experienced this.  When disaster struck Toyota survived because it’s suppliers did the right thing because Toyota had a history of doing the right thing by suppliers. In the UK I once heard the CEO of the best known Indian food company share (emotionally) how his suppliers pitched in to save his business when his only manufacturing facility burnt down overnight. Why?  Because he had treated them honorably.

4. If being fair to customers conflicts with your company’s financial goals, then fix your business model or get a new one.

To cultivate customer trust you must put in place a culture that calls everyone in the company – each and everyone – to genuinely consider your customers perspective and well being in each and every decision that your company makes.   Here is how Don and Martha put it: “Whenever your employees are solving a problem or undertaking an initiative, at some point they should ask themselves the question: What’s in the customer’s interest here?” And you have to act on that interest.

If we are truthful then it is highly unlikely that you have this culture today.  Your challenge is to create that culture; your biggest obstacle is likely to be the Tops, your business model and short-termism.  If you company does not create that kind of culture then you are leaving the field wide open for new entrants who build a business model around treating your customers fairly, cultivating their loyalty and reaping the benefits: think Netflix v Blockbuster (late fees) or Google v Yahoo! or Zane’s cycles v other bike sellers.

Final words

Archimedes said “Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.”

Culture is the lever and the CEO (as leader) is the fulcrum:  if you have do not have the right leader and the right culture then despite your best efforts you will not succeed in cultivating customer loyalty and harvesting the benefits. At best you will win minor battles like reducing customer service costs or improving the ROI of your marketing campaigns. And in the process of seeking ‘customer gold’ you will simply make the pick axe and shovel sellers rich.

Why culture is the Achilles Heel of your customer experience efforts (Part I)

The future of most customer efforts has already been written: take a look at your culture

I came to see, in my time at IBM, that culture isn’t just one aspect of the game – it is the game.”  Lou Gerstner

Many large companies are playing the Customer game and most of them will fail.  They may succeed in improving marketing campaign ROI and reducing churn through customer analytics.  They may succeed in reducing customer service costs by implementing making it harder for customer to contact the call centres and by replacing people with self-service systems.  Yes, they may win a ‘battle’ here and their.  Nonetheless, at the strategic level (‘war’) they will fail: they will fail to build customer loyalty and reap the rewards of that loyalty.  Why?

Culture.  If you scratch the surface you find the culture within many large established companies is one of “do whatever it takes to make the numbers!”  Why is that?  Because the Tops are judged by only one thing: making the numbers.  In general, Tops do not care about people – not the flesh and blood ’employees’, nor the flesh and blood suppliers/partner, nor the flesh and blood ‘customers’.  Nor do they care about or have an intimate understanding of operations.  How can they?

They are embedded in a structure (‘system’) which views customers as objects to be manipulated and wallets to be emptied; employees are simply resources which inconveniently come in a human form and are costly hence the focus on replacing them with technology; suppliers are also resources and the objective is to pay the lowest price; laws are simply inconvenient hurdles that one can find ways around; and the rightful role of the Tops is generalship (‘strategy’).  In the world of the Tops (business or politics) the only thing that matters is making the ‘numbers’: the end justifies the means.

This grim picture is mostly hidden from view.  It is the elephant in the room that no-one wants to acknowledge as it is too threatening – it conflicts with our espoused words and values.  Yet, occasionally this elephant burst on to the world stage in a dramatic fashion:  in the USA there was Worldcom, Enron, Andersen and recently the financial crisis; and in the UK we had the MPs expenses scandal, the financial crisis and recently the News of the World phone hacking scandal.

When you exit the ‘matrix of customer babble’ you will tend to find that the real agenda and system structure can best be described as “extracting maximum value at the expense of the customer” – to borrow Fred Reicheld’s words.  Large companies and the people within them resort to any manner of tactics to pry open the customer’s wallet and get as much out of it as possible right now in this transaction, in this quarter, in this year – to make the numbers.   You can see it in the marketing dept where marketers are busy devising all kinds of ‘bait and switch’ tactics.  You can also see it in the love of ‘neuromarketing’ using insight into the human mind to manipulate customers to do what we want them to do.  You can see it in the relentless dumbing down and depersonalising of customer service…….

What is usually missing is any genuine interest in the flesh and blood customers (or employees, suppliers and partners).  And this is obvious to many of us customers and that is why we use TripAdvisor or Epinions or turn to our social networks to get at the ‘truth’ rather than the marketing claptrap.

What is often missing is any sense of fair play: honesty and integrity between words and actions.   Who is best placed to know the reality of organisational life?  The employees.  In one large publicly quoted company the Tops forced all the Middles and Bottoms to sign an ethics policy.  The following week I learned that these honorable Tops had devised a way to get around the law by using a Greek smuggler to do the dirty work and thus distance themselves from any risk.  Does that sound remarkably similar to the News of the World where policeman and private detectives were used to the dirty work.

Is my experience unique?  Not according to employee surveys, one survey that springs to mind highlighted the following:

  • 49% of employees (who responded to the survey) do not have “trust and confidence” in their company’s senior management;
  • Only 36% of employees believe that their leaders “act with honesty and integrity”;
  • 76% of employees stated that, during a recent one year period, they have personally illegal or unethical behaviours at their companies.

How can you build any kind of meaningful relationship with customers with a culture like that?  I will examine that question in part II of this post – coming soon.

Valuable insight from the European Customer Experience World event

I read this from Steve West on LinkedIn and feel compelled to share it with you because it provides great insight in few words:

“The European Customer Experience World event held this week in London highlighted a very important fact. Companies whose foundations are built around the customer experience from inception are able to be flexible, fast and focused on implementing process change that is customer centric. Zappos being a prime example. Namely because it feels natural for everyone on the organisation to move with the customer. However, companies whose foundations have been built on commercial objectives that are not aligned with customer centricity find it very difficult to change the legacy of their ingrained attitude and culture. At the event we heard lots of examples from well known brands where it has taken up to 10 years just to get the Board to recognise the value of CEM – and that’s even before customer focused changes can start to take place!”

I want to share another way of saying the same thing but with deep insight into the human condition is:

“One creates from nothing.  If you try to create from something you are just changing something.   So in order to create something you have to be able to create nothing.  To make sure a person does not find out who he is, convince him that he can’t really make anything disappear.  All that is left then is to resist, resist, solve, fix, help or change things.  That’s trying to make something out of something.”

I will let you figure out who said that.  If you really want to know the name of the author – who incidentally teaches leadership and transformation – then email me.

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.

Are you confusing marketing focus with customer focus?

Here is what the latest Forrester reports says on loyalty schemes

I just read a piece by marketing week that discusses the key findings of the latest Forrester report on customer loyalty schemes.  Here are the key points that speak to me:

  • “The problem is that many brands fail to set long-term objectives for their schemes and are too focused on immediate sales and customer acquisition.  Instead they need to look beyond tactical activity and study what is driving customer value.”
  • There is little differentiation, poor communication and promotional support, while many programmes are not integrated with the sales cycle or in sync with branding;
  • There are also problems with measuring results and targeting the same consumers too often;
  • The drive for loyalty should fuel a brand’s entire marketing strategy; and
  • Loyalty must be earned and is usually the result of a series of compelling brand experiences which the consumer enjoys over time.

This got me thinking why so many marketing heavy organisations fail to embody customer focussed behaviour.  Is it possible that over the last ten years these organisations, or their marketing functions, have learned little?  Or is it that these organisations and their marketers confuse a marketing focus with a customer focus?

Here is brief reminder of the characteristics of a marketing focussed organisation v a customer-focussed one.

Characteristics of a marketing focussed organisation? 

I had the good fortune to work within a marketing focussed organisation (International Distillers & Vintners) some years ago and since then I have done some consulting to such organisations.  Here are the key characteristics that I have distinguished:

  • There tends to be strong belief that the organisation can prevail through bigger marketing budgets and smarter marketing despite any shortcomings in the product, distribution channels and customer relationships;
  • tendency to assume that they are in tune with customer needs and priorities yet when you dig under the surface what you find is that the ‘research’ is deeply flawed and in effect leads the ‘witness’ to provide the answers the marketers want  – even if this is at a subconscious level;
  • tendency to collapse marketing campaign success with success in cultivating customer relationships, customer value and customer loyalty.  In doing this they ignore the impact on the 80+% of customers that did not respond to the campaign because they did not find it relevant.
  • tendency to be blind to the totality of the customers experience with the organisation e.g. across business divisions, product lines, interaction channels and during the after-sales part of the customer journey;
  • the marketing function has little interest and/or power to shape and influence the customer experience across all the interaction channels and touchpoints. And no-one else is doing that either.

Characteristics of a customer focussed organisation

There are a lot less customer-focussed organisations yet there are enough of them to distinguish some of their defining characteristics.  Here are the ones that are key for me:

  • There is clarity on which types of customers the organisation is best placed to serve well and effort is made to select only those customers to ensure fit and minimise disappointment on the customer side and ‘waste’ in the organisation in terms of returns, disputes, complaints, bad press etc;
  • The business model is centred on retaining customers, cultivating customer loyalty and getting a bigger share of the customer spend;
  • The leaders personally identify and embody the customer-focussed philosophy and this is obvious to the people the work within the organisation and to the customers;
  • The senior management devote considerable organisational resources (including their time) to uncovering customer needs, segmenting customers by their needs and then coming up with and delivering propositions that create superior value for these customer segments on an ongoing basis;
  • A way of speaking and doing things that puts the customer and cultivating customer relationships at the heart of the business;
  • Hiring managers who have an affinity for people and can inspire the best of their employees by providing the employees an environment in which they feel appreciated, supported and rewarded for doing things that make the right impressions on customers;
  • An organisational design that recognises the need to structure around customer segments as much as product families and functional silos; and
  • Technology platform that enables the employees to anticipate and respond quickly and correctly to customer needs.

Making the transition from marketing focussed to customer focussed

When you look at the characteristics how do you feel about making the transition from marketing focussed to customer focussed.    Do you wonder if you can pull it off?   Does it occur as being hard, messy, painful and risky?  It is.  For existing organisations it requires transformation as in the caterpillar into the butterfly.  And that is why it is easier to pretend you are customer focussed whilst actually being marketing focussed!  Which in turn leaves the field open to leaders that ‘Feel the fear and do it anyway.”

What do you think?