Carol Smalley
Managing Editor, CRMGuru
Member
Posted 01-Apr-2003 01:56 AM
[Reprinted with Permission. www.eCustomerServiceWorld.com]
FAST GUIDE: PRET VS MCDONALD'S
Here's Gary Hamel, speaking last week, on why you should abandon the assumption that being customer-led is a good thing:
"Success has never been more fragile because the world is becoming more turbulent faster than most organizations are becoming more resilient. Resilience includes the capacity to change. It was Bill Gates who said 'At Microsoft we always see ourselves as two years away from failure'. That's a healthy attitude. It makes you realize you have to keep ahead. You don't achieve that by asking customers what they want.
Look at this comparison between Pret a Manger, the sandwich store, and McDonald's:
Pret's labour costs are 25% higher than McDonald's
It introduces a major new menu item every two weeks
All the ingredients are fresh every day
Its stores are open 50% fewer hours than McDonald's Yet...Pret's profit per square foot beats McDonald's. And, Pret is on a growth curve where McDonald's has simply stalled.
Why? Because Pret has tapped into a deep, unarticulated need for fresh, healthy, sometimes exotic-tasting fast food. They didn't get there by asking customers what they want. The two founders actually set the first Pret up to satisfy their own foodie desire for quality fresh sandwiches, not as a result of any widespread market research asking potential customers what they would buy.
People who innovate like this are not forecasters. They are in touch with what's happening, whereas the competition simply haven't noticed. They don't see the future. They see beneath the surface of the present. And they pull together what they see into a proposition that has instant appeal for customers, but which customers didn't even know they wanted until it appeared.
They're not customer-led; they understand what customers want better than customers do themselves. So, how do you do this? Nokia are a great example. Ten years ago the top people at Nokia got together in a cold room just outside the Arctic Circle and decided they were going to beat Motorola. Very funny. Motorola was and still is one of the most respected companies in the world, up there with GE.
Nokia, like Pret, succeeded because they saw what was changing and exploited it. There are three steps to doing this:
- Find the fringe
- Look for the pattern
- Data is not enough: Experience, feel and understand what's happening.
It's at the margin that you notice change happening first. Nokia sent its engineers from Finland and told them to live in places where exciting things were happening. They sent them to spend time in nightclubs in Tokyo, in the King's Road in London, on Venice Beach in southern California. Their brief was to observe marginal trend-setting lifestyles and blend in, then report back.
It was that experiential learning, getting under the skin of the 'now' by actually living it rather than conducting a questionnaire, that brought Nokia's engineers back to Finland with an emphasis on aesthetics and design and on more elegant, user-friendly interfaces. And that was how they did, indeed, beat Motorola in the phone handset market.
So, get your people—including your Board and other senior decision-makers—to share collective experiences and look at what's going on 'out there' together. Sitting around a table looking at a market research report into what customers say they want simply does not do it anymore.
Another company that tapped into the deep interests of its potential customers to solve a problem they weren't even consciously aware of is Bombardier, the Canadian company that makes the Ski Doo snow bike. The unsaid question was this: 'What if I can't use it enough to justify the expense, because it doesn't snow?'. So, the latest Ski Doo comes with an insurance policy attached that runs the first three years of the bike's
life: if it doesn't snow above 75% of the average snowfall for your region, you get a part-refund on the purchase price."
SOURCE: Gary Hamel talking in London on Friday.
www.eCustomerServiceWorld.com (visit the site and join free)
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What do you think about this article and its suggestion to abandon customer-led strategies and forge your own road?
Carol Parenzan Smalley
Managing Editor
www.CRMGuru.com
carol@CRMGuru.com
Graham Hill
Guru
Member
Posted 02-Apr-2003 02:18 AM
Reading through the article I waited for the revelation that the title promised...but it is well hidden and you have to have been reading other stuff to really spot it.
Hamel's assertion is that being customer-led is not enough to ensure business success. That you need to in effect know more than customers do about their own wants, needs and expectations to be in the vanguard of profitable service businesses.
The example he quotes is the customer-intuitive Pret a Manger vs. the product machine-like McDonalds. Whilst I agree that Pret is doing rather well and has a great product line-up and superb customer experience, this hardly justifies the assertion that you don't need to be customer led at all. There are plenty of caterers out there (and service businesses of all types) that rapidly come into being because of a great idea, but then equally rapidly go bust if they weren't on the mark with customers, or if customers change. You can be customer-led and responsive to change—that is the idea behind being market-orientation, a successful business strategy that involves more than just customers.
The real revelation comes later when discussing how the likes of Nokia identify unarticulated (or unarticulatable) wants and needs. There is ample evidence to suggest that customers make the vast majority of consumption decisions without being consciously aware of what they are doing, how they decide, or why. They just do automatically—hey, life is complicated enough without having to think serially about every decision! Gerald Zaltman's recent book ("How Customers Think") goes into this in some detail, backed up by new research in sociology, pscychology and neuro-science. There are a wide variety of approached available to companies who really want to think like customers, rather than just using tired focus groups to get a superficial view.
But you know what, many smart companies have been doing this for some time; trying to identiy customers needs through traditional survey methods, trying to identify their unarticulated wants through newer methods that access the customer's non-conscuious thinking, correlating them both to actual customer purchase behaviour using customer analytics and then using value-based models to see which of the above make economic sense.
Perhaps the world is more complicated than Hamel suggests. Being customer led by itself can be a problem if taken to extremes, but it is less likely to be one if you combine it with other smart approaches based upon real customer insight and then turn it all into a superior customer experience that is profitable.
Graham Hill
Independent CRM Consultant
Vishal Sarkar
Member Council
Member
Posted 03-Apr-2003 12:43 AM
Interesting article ! I don't think that Nokia or Pret are 'not' customer-led. Its more of the idea that they took steps to understand the customer hidden needs, ones that exist more on the sub conscious level. They figured out what kind of an 'experience' (concious + subconcious) the customer would like and accordingly modified their offerings to match them.
Lets look at the Nokia case. I was recently with a group of people discussing the kind of phones in the market and which one is better than the other (especially with the ongoing upward movement in technology). Nokia, I realized was a hot favorite, for reasons like—'Nokia is very comfortable to use', 'It has bigger screen', 'Once you use one Nokia—you can use any other Nokia model with ease', 'They always come up with latest innovations like camera phones', 'The phone looks stylish', and so on !
Now, if I were to gauge these ideas technically, it would not make much sense, since many competing brands have the same features. So why was Nokia preferred?
Looking at the statements brings to light more emotional drivers to a decision—making process. Hidden needs like the need to have a phone that should also enhance the status in a group.
I believe what Nokia did is similar to the Japanese concept of 'Gemba'—going to where the action really is—on site. They sent out staff to observe the behavior of people at various places and in various moods. This probably gave an insight into the hidden needs of the customers also surfacing at decisions making time. They tried to understand the customer experience. ( Can't we use VOC techniques here also to an extent?)
By just questioning a sample of customers, can we really expect the sub conscious needs also to come out clearly. If the customer is aware of these needs then why would they be hidden anyways?
The article points out how these companies went 'beyond' being customer-led, by trying to tap into the customers hidden needs or desires along with what the customers consciously desired. They tried to capture the customer 'experience' by sometimes putting themselves in the customers shoes and figuring out what they themselves would have liked. In the process, if they had some value added ideas then they went ahead and added those as well to the offering (like Pret founders).
Overall, I guess, thats how new ideas and trends also work. Understand the basic customer needs and think how you would like the experience to be if you were to use your own product or service. If your idea clicks with the customers—you have a winner. Behind this can go all the research on customer behaviour or just plain 'gut feel' (again conditioned by your sub-conciousness)!
regards,
Vishal Sarkar
Jim Sterne
Guru
Member
Picture of Jim Sterne
Posted 03-Apr-2003 09:35 PM
Those who used personalization engines on their Web sites early on learned an interesting lesson. If you only show people what you think will interest them (calculate what will interest them) they soon tire of the content and wander off.
That prompted the idea of the Serendipity Dial that allows site managers to increase the amount of randomness a dynamic content server might serve. The result was more interested customers who never knew what they might find. Granted, turning the dial too high drove people away as well because, well... because they never knew what they might find.
The moral of the story is that you need to constantly experiment and see what people react to—then run with it!
Jim Sterne
Target Marketing www.targeting.com
www.emetrics.org
Indria Djamil
Member
Posted 03-Apr-2003 11:31 PM
After reading the article and comments made by fellow members, I think those companies (Pret & Nokia) simply take one step further, that is to "embodied customer experience" instead just to interpret them through conventional means (survey, questionaires, etc)
This strategies is still within a "Customer-Led Strategies" Methodology, but with a more precise data acquirement of what customer really wants. Foe example Nokia using "hands_on" customer experiences by taking their engineer to places where "styles and fads" crowd met.
So, I think they are not abandoning Customer_Led Strategies, they just enhancing it through a more precise instrument in acquiring the market data.
IKD.
Carol Smalley
Managing Editor, CRMGuru
Member
Posted 07-Apr-2003 01:45 PM
Posted by Carol Smalley (Editor) on behalf of Tom Duncan [tduncan@colorado.edu]
Be careful you don't throw the baby out with the bath when it comes to "abandoning customer-led strategies."
Gary Hamel was talking about a limited area of marketing--new product development. He also seemed to have forgotten that ethnographic
research (i. e. observing customer behavior) has been around a long time. Ad agencies, for example, use this all the time. Fallon used this market research methodology to help develop the very successful Buddy Lee campaign a few years ago. Bensimon-Bryne D'Arcy (Toronto) used it to develop the "I Am Canadian" campaign for Molson Canadian beer.
Customers are by nature not creative so they can't always tell us what new product offerings they want. This is true. But when it comes to running the business after a new product has been created and introduced, every smart company I know of is customer-led. That's what being customer-focused is all about which is the heart of integrated marketing communication which CRM folks are just beginning to discover.
Tom Duncan, Ph.D.
Director, IMC MBA program
Daniels College of Business
University of Denver
Carol Parenzan Smalley
Managing Editor
www.CRMGuru.com
carol@CRMGuru.com
Graham Hill
Guru
Member
Posted 09-Apr-2003 05:16 AM
Tom
I am pleased you mentioned integrated marketing communications. It was long overdue.
For a number of years now, I have seen presentation slide after slide boldly saying that customer equity is king and that brand equity is dead. The reality couldn't be further from the truth.
They both effectively measure the same thing—intangible goodwill arising from market-facing activities—albeit at right angles to each other. It follows that you need a modicum of both in differing quantities to be successful at different points over a typical customer lifecycle. So perhaps, having strong brand equity is more important during the early phase of capturing customer leads, compared to the repeat customer phase where customer equity is more important.
Both of these concepts need to be integrated around a unifying framework provided by the customer's experience with a company, its products, its staff and its partners.
You can't do this effectively until you integrated marketing communications (above, through and below the line, and interactive marketing too) and understand how they drive economic value creation.
Strong Brands and Effective CRM are equally important.
Graham Hill
Independent Management Consultant