Customer-Centricity Hasn't Made It to Mainstream Marketing
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PrintMany of us who write and read this site consider ourselves advocates of customer-centric business practices. Many of us have been at it for more than a few years and most of us can point to some sterling cases of success.
Unfortunately, many mainstream marketers see customer-centric practices as a tactic not an all embracing strategy. If they didn't we wouldn't be getting reports like the following.
A Pitney Bowes study reported in the latest issue of Customer Strategy asked customers to rank marketing techniques from "0" (not irritating) to "10" (intensely irritating). I was not surprise to find the most interruptive techniques were considered the most irritating. Automated telesales, live telesales and spam email ranking over 9. Fourteen of the fifteen techniques reported had scores over 5. Only "promotions at railway stations/shopping centers was less but it was ranked 4.84. In spite of this, all 14 techniques are commonly used.
Here's what did surprise me. The interpretation of the study was that "personalized direct mail" was valued by customers. Why? Because it ranked 5.44, where as other "junk" communication rank higher. It takes some heavy spinning to turn something that was moderately irritating to customer to be seen as valued.
A second study by Retail System Research reported that 42% of retailers set prices based on an analysis of competitors pricing. Yet, retailers do say customer relationships matter. Yet, studies of retail profitability by IBM and others clearly show profitability is highest in retailers who focus on the value they deliver customers, not the price they charge.
Why aren't we able to reach mainstream marketing? Do we need to spend more energy on defining what not to do, that is, what undermines customer-centricity?
John Todor
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8 comments »
Graham Hill
What Exactly is Customer Centricity?
John
Interesting facts and figures.
Like you I find it sad that only scoring 5.44 on an 10-point irritation scale is equated with customers valuing marketing communications. Such findings stretch the marketing imagination. Middling-irritating communications may be less irritating than say, receiving an unwanted sales call for an unwanted product in the middle of dinner, but they are still irritating nevertheless and in most cases find themselves just as rapidly in the rubbish bin. This is the lower end of the customer-centrcity spectrum.
But I find the upper end of the customer-centricity spectrum equally misguided. It is perhaps best charachterised by the notion that by being nice to customers and giving them what they want, often irrespective of the cost, will automatically lead to increased customer retention, loyalty and thus profitability. Naturally, there are no hard numbers quoted in support of what is generally a financially unsupportable position.
Personally, I prefer the half-way house as taught at the recent Instituto Impresa Business School's Building the Customer Centric Organization executive education course in Madrid. Their definition of customer-centricity is a well-balanced combination of complementary capabilities that reliably deliver mutual value, customer-driven innovation that creates the right products and mass-personalisation for those high-value customers that are worth it. Note that this version of customer-centricity avoids the inefectiveness of broadcast mass marketing and the costs of coddling unprofitable customers. Instead, it is based upon a calculated assessment of which customers are worth doing business with then organising mutual value delivery around them.
At last, a breath of fresh-air in the rather stale discussions around customer-centricity. Enjoy.
Further reading:
Want to Learn About Customer Centricty?
http://www.customerthink.com/blog/want_learn_about_customer_centricity
Graham Hill
Independent CRM Consultant
Interim CRM Manager
John Todor
What do customer want?
Graham.
I agree with you that people who think giving customers what they want is mis-guided. "Delight" your customers still floats around as a strategy.
What do customers want? Do I want low, low prices from my local hardware store. Do I want gush gimicks? Only if I am playing a zero-sum game. Alas, most of us know from experience that doesn't work. The business just goes out of business, or finds some other way to shore up their end of the zero-sum game.
In my local hardware store I want competent people who can help me figure out what product fits my needs, I want to trust them so they can lead me to solutions I as yet don't understand. I want to be treated as a person. For this I will pay a slight premium and I will evangelize them to my friends and neighbors. And, I will treat them fairly.
The same goes for other companies I do business with. That is, unless I detect a short-term, zero-sum game in their demeanor. The the gloves come off and I treat them like they treat me.
John
John I. Todor, Ph.D.
Author of Addicted Customers: How to Get Them Hooked on Your Company.
rviney
Customer-Centric versus Product-Centric
John and Graham,
Enjoyed the conversation. I have also found that the industry talks a lot about "customer-centric marketing", but really fails to walk-the-walk.
My own observation is that the marketing industry is for the most part still working with a "product-centric" mind set. That approach started with the industrial revolution, mass production and mass marketing, and still is the mindset that drives most of marketing activity today. Breaking through this paradigm, especially among senior executives who grew up in a product-centric mind set, will not be quick or easy.
In addition to this, I find that while there is intellectual interest in the potential of adopting a customer-centric approach to marketing, but there are major organizational hurdles, especially in large companies:
1. Most organizations is physically set up to "sell products" or services, not to provide "personalized solutions". Most marketing is interactive to the state of accepting a "yes/no" response and processing a transaction for one product at a time, from a single profit center. Configuring personalized, multi-product solutions "upon request", including products from disparate profit centers, represents a considerable process challenge.
2. The financial accounting systems mirror the organizational structure. In some cases, the accounting systems for profit, especially at the customer level, either don't exist . . . or if they do, they are not compatible across profit centers.
3. Because of the configuration of financial accounting systems, internal metrics and rewards that are most important to the CEO are heavily product-centric as well. This is probably one major reason why we read about the disconnect between marketing measures of success and corporate financial statements that often contributes to short term CMO tenures.
My experience indicates that a demonstration of the benefits of working to remove all these hurdles to enabling a true customer-centric operational approach at scale is needed in most cases. The vision and courage of senior leadership to invest in these kinds of changes based on intellectual or conceptual reasoning or even an anecdotal research basis, is a rare commodity. I've seen it in evidence a few times, and when it is present, incredible improvements in the company's financial performance inevitably results.
I'm working to find a path to building a demonstration capability of the best practice approach to customer-centricity that I've had experience with in other organizations, but finding partners to fund such innovative work has not been easy. Until someone is able to put a working model in front of broad segments of industry and support a scaled operational model, I'm afraid true customer-centric programs are likely to remain trapped in power point discussions.
As Bob Thompson as often written, CRM is not easy, and it's not a quick fix. This is true in spades for true customer-centricity, and the ability to move marketing metrics from product sales and market share, and transactional response and conversion metrics, to customer value and share of wallet, and relationship and retention metrics.
Bob Viney
Co-Founder, Partner
Interactive Commerce Solutions
John Todor
Can Organization Change
Bob,
You have articulated some were formidable challenges to over-come. I am sure that all of us who have attempted to change an established organization have run into them. However, when you spell them out in a list one wonders whether customer-centricity is the province of new companies or new autonomous division.
Sadly, I think it is easier to start fresh.
John
John I. Todor, Ph.D.
Author of Addicted Customers: How to Get Them Hooked on Your Company.
Graham Hill
Customer-Centricities Capabilities
Bob, John
Sounds like we are all singing from the same songsheet.
Customer-centricity requires top to bottom and end-to-end joined-up thinking. That means everything from a balanced scorecard of measures cascaded down through the organisation, through a dynamic capabilities-based approach to enable continuously-evolving value delivery, to a mass-customised, even a personalised modular-product structure targeted primarily at valuable customers.
All of the individual components are well understood and are available almost off-the-shelf, but they are rarely brought together in a coherent, integrated way to drive profitable customer-centricity. The rare companies that do, for example the credit card company Capital One a few years ago, reap extraordinary benefits from doing so. It can be done, but it requires a step-up in the quality of thinking, organising and doing if it is to work.
Graham Hill
Independent CRM Consultant
Interim CRM Manager
John Todor
Outside-In Thinking
Graham & Bob,
I am in total agreement that there needs to be a top to bottom and end-to-end joined-up thinking to achieve the desired results. Some companies get lifts from less but they are not sustainable.
Let me add one other form of thinking - outside-in. This requires the company to make a determination of what customers value and how they make decision before they shape their offering. Often, mass-customization and personalization is based on the thinking of people inside the organization and doesn't really reflect what customers find meaningful and valuable.
John
John I. Todor, Ph.D.
Author of Addicted Customers: How to Get Them Hooked on Your Company.
Graham Hill
Joining-Up the Customer-Centricity Dots
John
With you 100% on this one.
As I pointed out in a recent post entitled 'Want to Learn About Customer Centricity', involving customers through them co-creating their own products, services and experiences is one of the foundation stones of customer-centricity. This should lead to the development of modular products (services and experiences) that can be stitched together on demand using product configurators and priced automatically. In this way, the customer gets to pull from the delivery system exactly the product he wants, where he wants it and when he wants it. These are three of the guiding principles of Womack & Jones' Lean Consumption approach to lean thinking in service industries.
A recent example is how Turkey's Garanti Bank provides ultra-personalised banking by letting customers build up their own credit card from 10 modular components, including having their own photo on the card. There are many similar examples from across the spectrum of companies.
None of this is new in principle. Using customers to co-create their own products was described in detail by Eric von Hippel in his book Democratising Information in 2005. Mass customisation was described by Joe Pine in his books on Mass Customisation in 1992 and Markets of One in 2000. Frank Piller brought customer co-creation and mass customisation together in his book on the Customer Centric Enterprise in 2004. And Womack & Jones stitched it all together into a customer-pulled delivery system in their book on Lean Solutions in 2005.
Further reading:
Want to Learn About Customer Centricty?
http://www.customerthink.com/blog/want_learn_about_customer_centricity
Garanti Bank's Ultra-Personalised Banking
http://www.springwise.com/financial_services/ultrapersonalized_banking/
Eric von Hippel's book on Democratising Innovation (free eBook)
http://web.mit.edu/evhippel/www/democ1.htm
Joe Pine's books on Mass Customisation
http://www.strategichorizons.com/mass.html
and Markets of One
http://www.strategichorizons.com/market.html
Frank Piller's book on the Customer Centric Enterprise
http://www.mass-customization.de/cce/index.html
Womack & Jones' article on Lean Consumption
http://www.tqm.be/downloads/LEAN%20consumption.pdf
Graham Hill
Independent CRM Consultant
Interim CRM Manager
John Todor
Customization and Communities
Graham,
What better way to customized products in ways that customers value -- co-creation. Now there is the collaborative-community co-creation that happens when companies like Nokia invite phone owners to describe how they would like to enhance their phone. Instead of Nokia wrestling with which ones will generated enough revenue to warrant their attention, they invite other phone owners to tackle the problem. Sort of an Open Source movement for the common man. Apparently it is very successful.
Unfortunately, too many business leaders keep trying to figure out how this fits in the zero-sum business model of man they operate on. When they do so, we as customers do so. When they are open and invite participation at least two human traits surface. One, I can and give the chance I will, it is satisfying to do so and rewarding to see others appreciate my efforts. Second, a tacit belief in generalized reciprocity takes hold.
John
John I. Todor, Ph.D.
Author of Addicted Customers: How to Get Them Hooked on Your Company.
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