Customer-Centricity: what does it take to make the transition to a customer-centric business?

What is our defining feature, our magnificence?

We are awesome.  We, individually as an organism and collectively as a species, are best signified as “that whose defining characteristic is the capacity to imagine possibilities and convert these possibilities to reality‘.  Yes, we are an organism that excels in listening to and telling Story.  Yes, we are an automatic meaning making machine.  And for me the distinguishing feature, the crowning glory, the magnificence of us is our ability / our deftness at converting a vision, a dream, a possibility in our mind into what is so in the world.

Allow me to give you specific examples of what I am talking about.  Think about the American Declaration of Independence and what resulted when this is put into the world.   Would there be a USA without this declaration?  Think about Martin Luther King’s “I have a dream” speech, vision, declaration, stand.  Think about Gandhi and his declaration that India will be free. Think about JFK’s “Man on the Moon” bold vision, challenge and address to congress.

Why doesn’t the ‘world work’?

Why doesn’t the ‘world work’ such that no-one is excluded?  Is that too abstract, too philosophical?  OK, let me make it simpler by asking the question:  why is it so that many of our fellow human beings live in hunger and die of hunger?  Do we lack the know how? No.  Do we lack the capacity, the resources, to feed our hungry fellow human beings?  No.  So why are our fellow human beings dying?  Look into this and you might come to the conclusion, that whilst many of us are inspired at the thought of a world in which every one of us has enough to eat (none of us starve), one or both of the following is present:

  • We simply cannot conceive of possibility of an Earth where all of us are well fed – this simply occurs as ridiculous to us; and/or
  • It is OK by us for our fellow human beings to starve as long as we do not have to ‘see’ it, face it, experience it.

I take no credit for this insight.  It rightly belong to an unacknowledged American genius (now living in exile) called Werner Erhard.  He got and articulated this position over 30+ years ago.  You might be wondering what this has to do with organisations and customer-centricity in particular.  Let’s deal with that – the foundation is in place to have that conversation.

Why is it that only a handful of big businesses have made the transition to being customer-centric?

What are the obstacles to making the transition to customer-centricity?  Is it lack of know how?  Is it the lack of capacity / resources?  Before you come to a conclusion, consider the following:

  • A ‘handful’ of poorly armed, poorly trained (militarily), yet powerfully motivated colonists defeated the military might and political power of the worlds’ greatest empire (the British empire);
  • A man (Gandhi) in a loincloth took on the world greatest empire and after many years of sacrifice / struggle he won, the empire capitulated;
  • One man’s speech (“I have a dream”) dramatically changed the social landscape of many millions of Americans despite the entrenched legacy of slavery;
  • One man (JFK) rallied a nation and put a man on the moon.

I assert that only a handful of companies have made the transition to being customer-centric because of one or both of the following:

  • Tops do not believe that if they look after their customers, their customers, will in return, look after them; and/or
  • It is perfectly OK for the business to continue as is (product/sales centric) because the business is doing just fine as it is.

Lets listen to what the CEO of O2 shares about their transition to customer-centricity

One of the few big companies, that I know of in the UK, that has made that transition is O2 (telco).  So it might just be worth taking a look at Ronan Dunne, the CEO, says:

Our philosophy was: create an enduring relationship.  How do you do that? You build trust. You take away the scams, the small print that people think is unfair.  You make your tariffing more transparent and simpler so that all the weasel is gone, so what you see is what you get…..To build a trust relationship with your customers you have to be really clear in your communication.  You have to be bold to change the rules of the game. You have to take risks.

By introducing Simplicity and Fair Deal, we were essentially writing a £500 million cheque against our P&L.

The thing that got us through those early days was…we had a very tough and open and honest debate as a board.  We finished the conversation by saying we may not be able to fully analyse this as a business case on a few PowerPoint slides, but we all believe that it is the right thing to do……

We looked each other in the eye as a team – finance, marketing, sales, the operation side – and said, ‘Do we, or do we not, believe this?‘  And as a team we absolutely signed up.  As a result every tough conversation we had subsequently was in the context of ‘If we believe doing the right thing for the customers is ultimately the most profitable business model, have we solved this particular issue?’ 

If each time we had a problem we had argued about it without the benefit of that context then it would have all fallen apart.  That basic premise of the long term sustainable profitability of the business being underpinned by creating a differentiating customer experience was the rock on which we built the brand.”

I draw your attention to the following

The O2 Tops created the possibility of being customer-centric AND believed that this was the right thing to do.  Why?  Because there was no statistical evidence, in the real world, that this was the right thing to do.  The outcome of their actions was uncertain, undetermined – that is the only time we need beliefs, else beliefs are superfluous.

The access to starting the customer-centric journey was boldness, the willingness to take risks. The O2 Board (the Tops) took a risk – a potential hit of £500m against their P&L.

The entire O2 Board discussed the matter at hand and each Board member signed up voluntarily.

Keeping the context (‘If we believe doing the right thing for customers is ultimately the most profitable business model…’) alive allowed the O2 Tops to make the difficult decisions without rupturing their relational bonds (without destroying their working relationship with one another)

And finally

The source of the material on O2 is the book BOLD by Shaun Smith and Andy Milligan.

What exactly is the cost of poor customer service? TalkTalk provides an answer

What exactly is the cost of poor service?

In the main that question is difficult to answer because conducting experiments in the business world is not easy. Companies do not easily take up experiments that say “lets provide great service to this set of customers and poor services to another set and then lets study the impact over the next three years or so”.  Yet sometimes those experiments happen and we can learn from them.  So let’s take a look at the UK telecoms industry and TalkTalk in particular.

This week this piece of direct mail landed in my letterbox and took me by surprise: TalkTalk (a well known brand) is offering unlimited broadband for £3.25 a month plus line rental.  My first thought was ” So that is the cost of poor customer service!”.  Before I dive into this deeper and share with you the financial cost of poor customer service allow me to tell you a little about TalkTalk.

According to the latest UKCSI survey “Among landline providers BT is the most improved (up 2 points), while Talk Talk is the only telecoms provider to show a significant decrease in satisfaction.”

TalkTalk has been plagued by problems and customer complaints including being billed for services that customers had not asked for and/or did not receive.  And when the customers rang up and complained it looks like those complaints were not dealt with well.  So some of the unhappy customers complained to Ofcom (the regulator).  And after giving TalkTalk several warnings and time to clean up the mess Ofcom has hit TalkTalk with the largest fine ever imposed on a telecoms provider.  Whilst the fine is large (£3m) it is nowhere near the maximum (£150m – 10% of turnover).

So the first part of the financial cost of poor customer service comes to £5.5m: £2.5 m is the sum that TalkTalk has agreed to the customers affected and the remaining £3m is the Ofcom fine.  Yet there is more.

When I was teaching the value of marketing and service to a skeptical audience of engineering oriented analyticals I justified investments in these areas on the basis that it improves the customer experience and builds the brand.  And those in turn allow you to charge higher prices, spend less on getting new customers and make higher profits.  Was I justified in making that assertion?  I decided to take a look at the broadband market and the current deals that are on offer from the major players.   Here is what I found (disclosure – I have not done a detailed point by point examination of the functions, features, pricing.. yet where possible I have compared Apples with Apples):

Looking at the table it is immediately clear (at least to me) that if you deliver a poor customer experience though poor service then you pay a financial penalty in the form of a price discount – at least when it comes to the UK telecoms market.  Take a closer look and you will see the following:

  • O2 renowned for great customer service earns £100 more per customer per year – TalkTalk is charging 2/3 of the price that O2 is charging;
  • BT the biggest player in the broadband market and not particularly know for great service yet it can earn £67.50 more per customer per year whilst only allowing the customer to download 10GB of data per month.

The Bottom Line

By providing poor customer service and not dealing effectively with customer complaints TalkTalk has delivered a poor customer experience and tarnished its reputation.  The financial penalty has come in several flavours:

  • compensation to existing customers;
  • fine by Ofcom;
  • higher marketing costs to get new customers; and
  • having to substantially discount the price in order to lure new customers.

Service (how you treat the customer) in its many facets is critical to value you deliver to the customer.  I spelled this out indirectly in the following post which is worth revisiting: “Thinking strategically about customer experience: the five components of customer value”.  In a nutshell, in the informed customer’s mind there is more risk in doing business with a supplier that offers poor service and so the supplier has to offer a price discount and may be forced to do business with price sensitive customers rather than service centred customers.

Last words

Does your business focus on providing great customer service?  Do you treat customer complaints seriously?  No.  Then you may be the next TalkTalk.  Yes, then you may become the next O2.  As always the choice is yours.