How Much Power Do Customers Have?

Gwynne Young
Managing Editor, CustomerThink
Member

Posted 23-Oct-2006 09:38 AM
I recently responded to a survey sent to me after I called about my DSL outage. (See my posting in the Customer Service discussion for more on this.)

One of the questions, that I'm very familiar with from my job here, was how likely was it that I would recommend the DSL company to others. And I selected "not very."

Well, I got a phone call the next day, following up to find out why. I told the representative that it was because the service wasn't reliable enough. I never knew when it would be down for a day. And her reply was that there wasn't a lot they could do about that. Well, I submit that businesses need to do something about that. But too often, they miss the big-ticket items. I mean, if a DSL company can't do anything about reliability, it's got big problems.

In Paul Greenberg's article, Don't Bank on Loyal Customers, in the Oct. 23, 2006, Advisor, he talks about this very thing. He talks about companies that serve him well but which he wouldn't recommend to other people.

The difference between me and Paul is that he thinks the new business environment is going to require these companies to change. And I'm less optimistic. I think they're going to keep doing the same ol', same ol' thing. Paul believes in the day of word-of-mouth and blogging that the power is shifting to the customer. I dearly would like to see this, but I'm not holding my breath.

Where do you stand? Do you see signs that customers are gaining more power and that companies are being forced to change their tactics?

Graham Hill
Guru
Member

Posted 25-Oct-2006 12:50 AM
Gwynne

I believe that you are both right, but how right you are depends upon what time period you look over,

There is certainly a nascent movement in the direction which Paul describes in his article. When P&G CEO AG Lafley uses his big speech to the Association of National Advertisers to exhort them to "Let Go" of their brands and cede control to customers, then you know something is happening. And a growing number of real companies are doing exactly that.

But they are not disbanding their Marketing departments and firing all their marketers, they are running controlled experiments to learn how much and how to bring customers inside the company. They are looking at which customers should be invited into the innovation process. They are setting-up corporate blogs to start a dialogue with interested customers. They are monitoring how "buzz" drives word of mouth and sales. They are starting to measure net promoter scores. And they are allowing customers to serve themselves in certain ways.

Just like the adoption of any new idea, initially there is a lot of experimentation to see what works by early adopters. Later the masses take up the idea and make it mainstream. And some companies never adopt the idea. Many of these are doomed to ultimately competing on the lowest-price.

We are still in the experimentation phase. Companies are just catching-on to the importance of customer co-creation. They tried company-driven CRM with mixed success. They are working to implement customer-driven CEM. The most advanced are now bringing customers inside the company to co-create the future together.

Like Paul, I am convinced that customer co-creation is one of the next evolutionary stages of Customer Business.

Graham Hill
Independent CRM Consultant

Jeremy Cox
Member

Posted 02-Nov-2006 08:55 AM
Gwynne I understand why you are doubtful. But it's even worse over here in the UK with public sector people. There is so little accountability and most regulations appear to be little more than a 'jobsworth's charter'!

The language I'd like to use is unprintable here.

warmest regards

Jeremy

Jeremy Cox MA DipM
Managing Director
The Wisdom Network Ltd,
www.thewisdomnetwork.com

Malcolm Wicks
Member

Posted 06-Nov-2006 09:41 AM
Many businesses are in that no mans land between two positions. On one side is the "we know best" traditional position and on the other is the "customer knows best" new way of thinking. As businesses oscillate between the two positions they send confusing signals to customers and to their own staff.

I've noticed in the last year that whenever I ask the audience I'm presenting to for names of either the "good" or the "bad" of customer driven businesses the mood has changed. There was almost total agreement about who was good. Not any more. Almost no matter what name comes up as good there is nearly always somone who jumps in to disagree. Last week it was the turn of Google, Carphone Warehouse and Tesco to get hammered.

I believe that the first companies that really crack how to be customer driven in everything that they do (or even most things) are going to wipe all their uncertain and indecisive competitors away.

Malcolm

David Mangen
Member

Posted 07-Nov-2006 07:36 AM
Gwynne,

Let's not overlook the role of competitive markets in this scenario.

Even though the old public utilities—one of which probably supplies your DSL—are now more open to competitive market forces than in the past, their collective mind set is (I suspect) more one of hostage loyalty as opposed to earned loyalty. We may well debate whether this is a smart business move, but your costs of switching suppliers may in the short term be prohibitive, even if a feasible alternative exists. Hence the desire of a company in a market with little competition to implement the quality improvements needed to gain your psychological loyalty may be minimal.

Contrast this to a market with rampant competition, and customer power can manifest itself quite readily. Switching costs are minimal. Thus we see the switch to empowered customers being catered to first in these markets.

What I suspect the suppliers in monopolistic markets fail to realize is that their opportunity to convert to a psychologically loyal customer base is now—while they still have hostage loyalty. Otherwise, when viable alternatives arise, their customers will flee like rats from a sinking ship.

David J. Mangen