Amazon aspires to be “Earth’s most customer-centric company.” Numerous mission statements are sprinkled with customer focus. But in reality it is hard to actually be customer centric. Many companies talk about it but only a few achieve the holy grail!
I loved the concept that Prof Ranajoy Gulati speaks about: “In fact the big leap that companies need to make is to “not sell what they produce” but to “solve customer problems” & then suddenly “who produces the product is no longer important “because you start “owning the problem space”.
Customer-centric companies tracked by Gulati between 2001 and 2007 delivered shareholder returns of 150 percent while the S&P 500 delivered 14 percent. While research like this looks great, one wonders why there are not too many companies who “really put the customer at the centre”. Only companies who are great at “disruption” seem to truly belong to the category of obsessively customer focused. A customer-centric organization’s business is built completely around the customer. This kind of company has a strong understanding of the customer’s value and what the customer represents to the business’s profitability. With this knowledge, a customer-centric company adapts everything it does – from R&D to Customer service – to deliver the best value at the right cost to their customer.
The old adage that customers are always correct may not always be right. Current breed of customers are spoilt for choice & empowered. E commerce industry in India is a classic example where consumers are getting pampered with discounts. But there is a difference between “customer friendliness” & “customer centricity”. Companies create value for customers but also have to capture value in their business to be sustainable. So are companies like Amazon & Zappos the outliers? Zappos actually says that If a customer calls for a product and Zappos does not have the product in stock, they recommend a competitor who has it. While Zappos will lose the sale, in the long run it’s best for Zappos because the customer appreciates the help and tells their friends the story. It creates word of mouth.
Peter Fader, of HBS, has this interesting take: “Customer centricity is a strategy to fundamentally align a company’s products and services with the wants and needs of its most valuable customers. That strategy has a specific aim: more profits for the long term. This is a goal that every business would like to achieve… But you’ll only be able to get there and put customer centricity to use if you are willing to start thinking in new—and in some cases, truly radical—ways.”
So how should companies become more Customer centric:
- Sort customers into –who gives value & who does not?
- Operations-develop the ability to deliver different products & services to different customers-not easy! At first the operations folk will always say no!
- Creating a customer-centric culture where you don’t script every interaction. Therefore, employees need to be able to make the right judgment calls on their own when dealing with customers.
- Focus on customer satisfaction & retention over customer acquisition. In a 2013 Forrester survey of global CMOs, 63% listed acquiring new customers as their top priority, while just 22% said retaining current customers was their top goal. In India this is particularly hard because of low penetration of products & services.
- Customer-obsessed enterprises must migrate investment budgets from areas that traditionally created dominance — brand advertising, distribution, mergers for scale, and supplier relationships — and invest in Retention & customer experiences
Prof Niraj Dewar, Professor in marketing at the Ivey Business School has this interesting comment: “Companies’ upstream activities, such as sourcing, production, and logistics are being commoditized or outsourced, while downstream activities aimed at shaping customers’ perception and reducing their costs and risks are emerging as the main sources of competitive advantage. To compete effectively, companies must shift their focus from upstream to downstream activities, emphasizing how they define their competitive set, influence customers’ purchase criteria, innovate to solve customer problems, and build advantage by accumulating customer data and harnessing network effect”.
I had written about this earlier as well. What does Customer centricity mean to you? I would love to have your feedback. Here is what I feel:
- Being loyal to customers & not the other way around (customers needing to be loyal to the company). This needs companies to have a longer term view of customer lifetime value & not a short term view of immediate profit. It needs an internal senior level stakeholder who champions the customer cause (CMO?)
- Become more accessible to customers & respond faster to their needs. This needs companies to move from “insight to action”. To act faster, companies need to break silos within their organisation to be able to respond to customers.
- Use information to make every interaction relevant & use customer data to more powerfully personalise company’s interactions with the customer. The Big data world is only producing more such information for marketers to leverage. This amounts to a mass customisation strategy where the CIO & CMO need to work very closely together to make meaningful changes in the company’s operating environment. And most critically, to do this keeping the customers sensitivity to privacy as paramount!
- Strategically think through what culture changes the enterprise needs to become more customer centric. Today technology & Big data based insights can help you accelerate this process.
For those of you in Mumbai, we at Cequity are doing this wonderful conference called Customer centricity world 2015 which has a keynote by Dr Bala Balachandran. Do join us for this conference & you can learn more here: http://www.customercentricityworld.com/#about