What's Inside the Mind of the Customer?

Bob Thompson
Founder, CRMGuru.com
Member

Posted 08-Jan-2004 11:39 PM
What does it really mean to be "customer-centric" and how can a company make this a profitable business approach?

Barnes: Customer centricity is a long-term strategy. It's not enough simply to have the customer in mind when making decisions, as many companies come at such decisions from what they think the customers want. They are often wrong. What's important to being truly customer-centric is that a firm really understands customers and has considerable insight into how the customers think and what's important in their lives. This can be a truly profitable approach to business, provided that the firm has a long-term perspective on Profitability and resists the temptation to drive short-term results only.

How do you gauge loyalty? How do you get into the customer’s mind?

Barnes: First of all, I think it is critically important here as well that companies and their executives realize exactly what loyalty is. Many firms still interpret loyalty as a behavioral concept. In other words, if a customer comes back again and again to buy our products or services, that customer is considered to be "loyal." That's not my interpretation. Repeat buying behavior is not loyalty; it is closer to the concept of retention. Retention and loyalty are two different concepts. My research has shown over and over again that retention is vulnerable, in those customers who buy regularly may be tempted to go elsewhere as soon as a better bargain comes along. The truly "loyal" customer has much more of an emotional bond with the company or brand that will be much more enduring.

You are right to ask how to get inside the customer's mind, because that is where loyalty truly resides. To understand loyalty, we have to understand the kind of emotional attachment the loyal customer has to the company or brand. It's much more than how often he or she buys from us, or how much he or she spends annually, or what share of his or her wallet we have. These are all behavioral measures. To understand whether customers are truly loyal, we have to understand how they feel toward doing business with us, what role our company or product plays in their lives, and how they would feel if we were no longer available. This requires much deeper insight into customers' lives and how they FEEL about the companies and brands with which they deal.

Why aren’t traditional metrics optimal for determining satisfaction and loyalty?

Barnes: My experience is that many companies come at the measurement of satisfaction and loyalty in an entirely too simplistic manner. They either have not devoted the depth of thinking to the concepts that they deserve, or they wish to simplify so that results may be easy to understand -- both dangerous. For example, many companies still measure satisfaction with a single question, such as "all things considered, how satisfied would you say you are with your dealings with company X?" The customer is then asked to indicate his or her level of satisfaction on a certain scale -- five-point, ten-point, etc. The results of such a question, taken in isolation, are in my opinion useless.

Join the discussion! Ask Jim a question, or share your own point of view.

[This message was edited by Bob Thompson on 07-Feb-2004 at 09:06 AM.]

[This message was edited by Bob Thompson on 07-Feb-2004 at 09:07 AM.]

Posts: 77 | Location: Burlingame, CA, USA | Registered: 05-Aug-2002 Reply With QuoteEdit or Delete MessageReport This Post
Graham Hill
Guru
Member

Posted 12-Jan-2004 12:37 AM Hide Post
Jim

I couldn't agree more. The role of 'emotions' (vs logic) in customer decisioning is greatly misunderstood in the business world.

The work of Damassio, LeDoux, Zaltman and many others has shown clearly that the vast majority of consumer decisions are made either largely by, or under very strong influence of, the non-conscious emotional brain.

This in turn is causing a reevaluation of decades of research into consumer decisioning and of consumer research methods, to enable marketers to reach beneath the conscious veneer of logic to the often non-conscious body of emotions that TOGETHER drive how we make decisions.

Questions about what exactly is customer satisfaction, the difference between retention and loyalty, etc, are but one facet of this reevaluation.

Part of the challenge for customer-oriented companies is to understand both of these aspects of customer decisioning, of how that in turn drives their behaviour in certain circumstances (e.g. making a sales enquiry on the phone) and what that means for how the companies must organise themselves to create profitable, long-term mutual value for both.

Watch this space...

Graham Hill
Independent CRM Consultant

Posts: 369 | Registered: 24-Mar-2003 Reply With QuoteEdit or Delete MessageReport This Post
Ignored post by Graham Hill posted 12-Jan-2004 12:37 AM Show Post
Danny Khow
Member

Posted 12-Jan-2004 12:38 AM Hide Post
Hi Jim,

Most of my work have been in the Insurance Industry and all these while we have been measuring Customer Loyalty in terms of behavioral measures such as the tendency to recommend.
Could you give examples of how one might go about understanding how customers in the Insurance Industry FEEL about doing business with them?
Lastly, where can I get my hands on your retention and loyalty researches?
Thanks

Posts: 17 | Registered: 17-Apr-2003 Reply With QuoteEdit or Delete MessageReport This Post
Ignored post by Danny Khow posted 12-Jan-2004 12:38 AM Show Post
Jim Barnes, CRMGuru Panelist
Advisory Board
Member
Picture of Jim Barnes, CRMGuru Panelist

Posted 13-Jan-2004 09:53 AM Hide Post
Hi Danny

Your industry is not unique. Most companies measure their success using similar predictable, behavioral, easily-measured indicators. But it doesn't have to be that way. In fact, my view is that the insurance industry is an inherently emotive sector, driven as it is by concepts such as risk, protection and loss. There are numerous opportunities for insurance companies to get past the policy and much closer to their policyholders through the people they employ and by cultivating solid brand relationships based on emotions such as trust and even pride. My work in the industry indicates that there exists a large segment of customers who have a de-commoditized view of insurance and want to be able to rely on companies and their employees. Insurance companies have tended toward a commodity approach to marketing and, with some notable expections, have not cultivated emotive connections with policyholders.

My view on such matters is covered in depth in my book "Secrets of Customer Relationship Management: it's all about how you make them feel" and in a white paper on Customer Insight that is available on the CRMguru.com site.

Jim Barnes
CRMguru panel member

quote:Originally posted by Danny Khow:
Hi Jim,

Most of my work have been in the Insurance Industry and all these while we have been measuring Customer Loyalty in terms of behavioral measures such as the tendency to recommend.
Could you give examples of how one might go about understanding how customers in the Insurance Industry FEEL about doing business with them?
Lastly, where can I get my hands on your retention and loyalty researches?
Thanks

CRMguru panelist specializing in customer relationship strategy and measurement

Posts: 28 | Location: St. John's, NL Canada | Registered: 20-Mar-2003 Reply With QuoteEdit or Delete MessageReport This Post
Ignored post by Jim Barnes, CRMGuru Panelist posted 13-Jan-2004 09:53 AM Show Post
Maureen
Member

Posted 15-Jan-2004 10:09 AM Hide Post
SmileHi Jim,
I agree that the Insurance industry is all about "trust". We need to trust that the customer will do his utmost to avoid a loss, and the customer has to trust that we will be there to put things back together when he needs us. We also don't make enough of an effort to build "touchpoints" with our customers. Unlike the banks, we don't have regular interactions with our customers. We need to create them. Customers usually only talk to us when there's a claim, and that's still only a small portion of our customers. Getting out there and teaching our policyholders about risk mangagement, being involved in the community, being visible in endeavours that uphold the principles of trust would make us "trustworthy" in the eyes of our policyholders and would go along way in creating positive feelings in the minds and hearts of our customers. For the most part, our policyholders see Insurers as an anonymous building of glass and steel. And it's pretty touch for anyone to generate feelings about a building, isn't it?

quote:Originally posted by Jim Barnes:e
Hi Danny

Your industry is not unique. Most companies measure their success using similar predictable, behavioral, easily-measured indicators. But it doesn't have to be that way. In fact, my view is that the insurance industry is an inherently emotive sector, driven as it is by concepts such as risk, protection and loss. There are numerous opportunities for insurance companies to get past the policy and much closer to their policyholders through the people they employ and by cultivating solid brand relationships based on emotions such as trust and even pride. My work in the industry indicates that there exists a large segment of customers who have a de-commoditized view of insurance and want to be able to rely on companies and their employees. Insurance companies have tended toward a commodity approach to marketing and, with some notable expections, have not cultivated emotive connections with policyholders.

My view on such matters is covered in depth in my book "Secrets of Customer Relationship Management: it's all about how you make them feel" and in a white paper on Customer Insight that is available on the CRMguru.com site.

Jim Barnes
CRMguru panel member

quote:Originally posted by Danny Khow:
Hi Jim,

Most of my work have been in the Insurance Industry and all these while we have been measuring Customer Loyalty in terms of behavioral measures such as the tendency to recommend.
Could you give examples of how one might go about understanding how customers in the Insurance Industry FEEL about doing business with them?
Lastly, where can I get my hands on your retention and loyalty researches?
Thanks

CRMguru panelist specializing in customer relationship strategy and measurement

Posts: 2 | Location: Toronto, Ontario | Registered: 15-Jan-2004 Reply With QuoteEdit or Delete MessageReport This Post
Ignored post by Maureen posted 15-Jan-2004 10:09 AM Show Post
Graham Hill
Guru
Member

Posted 20-Jan-2004 06:56 AM Hide Post
Maureen

It's easy to add touchpoints. But its much harder to add value-adding ones...

I would be interested to know what trust-building touchpoints you think an insurance company could credibly offer that would add value to customers' lives, without being outside the sphere of capabilities a typical insurer would have?

Graham Hill
Independent CRM Consultant

Posts: 369 | Registered: 24-Mar-2003 Reply With QuoteEdit or Delete MessageReport This Post
Ignored post by Graham Hill posted 20-Jan-2004 06:56 AM Show Post
gautam
Member
Picture of gautam

Posted 22-Jan-2004 05:54 AM Hide Post
Smile Hi all,

This made interesting reading as we are trying to do just that ay my company- move our people out of a transaction orientation and towards building lasting relationships.
We have a system in which our sales and support teams are supposed to file customer interactions. Most people here have no direct problems with the software or process - they don't find it irratating or too much to do etc.
They also understand the analytical benefits of recording calls.
However they are yet to be convinced that carefuly recording each client meeting can help improve their relationship. Which keeps them thier call-sheets a bit "shallow" in detail.

I've come across the "continous conversation" concept and think that this would be a good way to make our sales personally relate to the concept. I shall be making a pitch to our Sales team next week and hope to bring this up.

However, my understanding of continous conversation is a bit weak - If you can offer a lucid explanation of the concept and/or point me to some success stories, it would be a huge help.

Thanks very much for your past contributions and also for taking the time to read this. Cheers!
Gautam.

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All conservatism is based upon the idea that if you leave things alone you leave them as they are. But you do not. If you leave a thing alone you leave it to a torrent of change. - G. K. Chesterton

Posts: 16 | Location: Bombay, India | Registered: 11-Jul-2003 Reply With QuoteEdit or Delete MessageReport This Post
Ignored post by gautam posted 22-Jan-2004 05:54 AM Show Post
Niko
Member

Posted 26-Jan-2004 12:33 AM Hide Post
If I may be allowed my view, and elicit Jim's response on it, as a customer of insurance companies (aren't we all? -Smile), with some insight of Customer Loyalty:

- I strongly believe that loyalty in this sector, as much as in any other commoditised sector, comes down to:

1. Price (be the cheaper you'll get my business), provided the difference is significant to overcome 'administrative lock in' (alternative quote search time, paperwork etc). The more expensive you are, the easier you are making it for me to look around.

2. Product Offering - designed to my needs and offering 'bits' of add on peace of mind that others don't.

Getting into the customer's mind through 'continous' discussion, or any other means, should, IMHO, be in the scope of a co-ordinated effort to find out what product's does this customer (or customer sector), would want to buy (including the 'augmented' product) at what price. And we should be doing it accross all touch points, assuming that we already have a consistent - across the board - business and technologal operational strategy and infrastructure in doing so.

That should (all other factors being equal - something they never are -Frown ), build brand image and loyalty to the brand. Otherwise, why bother with touch points and continous customer discussion? I fail to see how on their own will bring trust, and loyalty in a commodity market that to change provider is as easy as going on the web and doing a Google search?

Regards,

Niko

quote:Originally posted by Graham Hill:
Maureen

It's easy to add touchpoints. But its much harder to add value-adding ones...

I would be interested to know what trust-building touchpoints you think an insurance company could credibly offer that would add value to customers' lives, without being outside the sphere of capabilities a typical insurer would have?

Graham Hill
Independent CRM Consultant

Posts: 17 | Registered: 06-Oct-2003 Reply With QuoteEdit or Delete MessageReport This Post
Ignored post by Niko posted 26-Jan-2004 12:33 AM Show Post
gautam
Member
Picture of gautam

Posted 27-Jan-2004 08:05 PM Hide Post
That was a great point!! Too often do biz-executives forget the ground realites of their industry and thier position in it.. There is a real danger of focusing on the wrong things, those that dont matter when it comes to bottom-line impact..
However, imagine the case of a B2B company that already has all the basics of product and price right. As a result, its already in the top-tier on market-share and revenues.. So we got the basic product-price proposition right, and we got value-added services that customers appreciate. And we have the revenues to show for it. HOWEVER, now the challenge is to push the envelope further, with client's where were already have decent wallet-share. The challenge is also to consolidate the leadership position and build some lock-ins.

quote: - I strongly believe that loyalty in this sector, as much as in any other commoditised sector, comes down to:

Your suggested focus is bang on target for companies that are not business leaders in the product-price area, or that can still improve there..

HOWEVER, When two competititors are offering the same product-price combination and there is no scope to do better, how does one diffrentiate itself? How does it grab more wallet-share for the same product-line?
AFTER having achieved this level of operational effeciecny -I think one way to go is by creating a positive customer experience - become so "pleasant" to do biz with, that the customer will prefer your "commodity" over other similar offerings. And the challenge is to do it in a cost-effective way that does not compromise your operational effeciency, yet produces sufficient impact on the customer.

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All conservatism is based upon the idea that if you leave things alone you leave them as they are. But you do not. If you leave a thing alone you leave it to a torrent of change. - G. K. Chesterton

Posts: 16 | Location: Bombay, India | Registered: 11-Jul-2003 Reply With QuoteEdit or Delete MessageReport This Post
Ignored post by gautam posted 27-Jan-2004 08:05 PM Show Post
Peter Avery
Member

Posted 27-Jan-2004 11:36 PM Hide Post
Jim, I agree with your comments above and think we are on the same wavelength, yet I often feel isolated in my organisation as so many people don’t really understand CRM or customer centricity. Here are my thoughts expanding on the concept of customer centricity.

Customer centricity is about understanding your customers needs and tailoring your product and service offering to meet those needs - right offer to the right person through the right channel at the right time. It sounds easy to do, but as many of us know, it is pretty difficult to achieve, particularly when you are facing a typical consultant and vendor driven CRM implementation that was 'done to them', rather than 'done with them', without any deep understanding of a CRM Vision, the 'why', the 'how' or what else they needed to change to get any real value from it.

It is my belief that without the right people, a CRM Vision, a CRM/Marketing strategy, advanced Direct Marketing, a solid understanding of customer information, multiple segmentation and analysis, customer insights, customer profitability & value analysis, market research, a switched on, aligned and effective sales force, performance management, a learning culture and an understanding about what CRM really is about....an organisation will get very little bottom line benefit from implementing a CRM system in the short term, almost regardless of what the technology is or how well it is implemented (if the technology is poor and the implementation average then it is a bigger mountain to climb). If some of these areas are weak or non-existent, there is little chance of it truly becoming customer centric in the medium term. If there are poor linkages between these areas and functions (such as an inability for the sales force to execute effectively based on your customer insights) then there are real barriers that need to be overcome to improve your degree of customer centricity.

CRM is a concept, an approach, a strategy and a philosophy that is relatively intangible concept. So merely delivering a presentation on your CRM Vision and CRM strategy isn't enough to make people 'get it', believe in CRM and become a CRM advocate. Significant efforts need to be made through sharing of knowledge, effective communication, education and training to achieve real change management to deliver significant benefits from CRM and develop a customer centric culture, and a big part of that is in the 'believing in CRM'.

I firmly believe that to reach a practicing level in terms of CRM capabilities, an organisation needs to tackle the largest change management, communication, (re)-education and training challenge that it has probably ever faced. I don't believe that customer centricity can be firmly entrenched into the organisational culture until all of the senior management, middle management, customer facing people and marketing team actually 'get it' and are fully leveraging the CRM capabilities (and, even once this is achieved there is a mountain of change management effort required to make the organisation truly customer centric).

A CRM system is only a tool, in the same way that if someone gave me a hammer, a saw and an electric drill, then asked me to build them a house then I wouldn't know how to. Giving people tools does not transform them into skilled tradesmen. We need to continually teach people how to build better houses and how to be customer centric - the teaching and learning is not a one off exercise - it requires continuous education and reinforcement. Giving people better tools should help an organisation to be more effective, but it is not necessarily the case unless they know why and how to use the tools, and it can take years of effort for that behaviour and understanding to become entrenched in the culture.

Feel free to contact me if you require further info

Regards

Pete Avery
Project Manager CRM
Peteavery247@yahoo.com.au

Posts: 2 | Location: Sydney, NSW, Australia | Registered: 08-Sep-2003 Reply With QuoteEdit or Delete MessageReport This Post
Ignored post by Peter Avery posted 27-Jan-2004 11:36 PM Show Post
gautam
Member
Picture of gautam

Posted 28-Jan-2004 06:36 AM Hide Post

quote: A CRM system is only a tool, in the same way that if someone gave me a hammer, a saw and an electric drill, then asked me to build them a house then I wouldn't know how to. Giving people tools does not transform them into skilled tradesmen

That really drives home a point...
I guess when it comes to change management, while we are becoming good at selling concepts, making ppl believe at rational level; i think we are missing out on the kind of communication and training/re-skilling that will actually make people comfortable with implementing the concepts everday. And until we can figure out how to do that, people are simply going to be un-able to get it.
Possibly we need to make changes in our own treatment and approach before we can get the real buy-in.
To paraphrase the title of this topic - I guess in the end, its not jsut the customer; we also have to get inside the minds of our own people...

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All conservatism is based upon the idea that if you leave things alone you leave them as they are. But you do not. If you leave a thing alone you leave it to a torrent of change. - G. K. Chesterton