How the Recession Increases Customer-Centricity

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Reading through dozens of thoughtful posts on this and other CRM portals, there seemd to be one common assumption: That the recession will automatically result in less customer-centricity. The reasoning seems to go somewhere along the lines that as cash is scarce in the recession, companies will be forced to cut costs, customer service will suffer, the customer experience will get worse and thus, customer-centricity must suffer as a result too.

That may be true in some circumstances but it doesn't have to be. In fact, I believe that the recession can actually increase customer-centricity when certain conditions are met. Here's how.

Back in May 2008 I wrote a post on How Customer Centricity Drives Profits [1]. In it I set out five characteristics of customer-centricity. After reading much of the analysis of how companies have behaved in this emerging recession and how the winners behaved in the the previous recessions, I believe that companies meeting the five conditions are able to increase their customer-centricity and to profit from the recession as a result. Especially when their competitors are just cutting costs indiscriminately.

Let's remind ourselves of the five characteristics and see how the recession increases customer-cemtricity:

Having a deep understanding of customer needs (based on customer jobs and outcomes) - As I wrote in an another post on Why You Need to Get Really Close to Your Customers in a Recession [2], the key to understanding customers' needs is to look at the jobs they want to do and the outcomes they want to achieve by doing them. This is the best definition of a customers' need available today. Your job as a company is to offer products, services and experiences that closely match those customers' needs. As companies look at respond to the recession, understanding customes' needs will help them target their limited resources at those needs where customers are either underserved, or where they need the most help.
Mass customisation of products, services & experiences - As Patty Seybold points out in a recent blog post on Use Smart Customization to Recession-Proof Your Business [3], the more flexibility you have in the products you offer, the more you can tailor them to exactly meet customers' needs. And the more you can reduce offering products & services that don't meet any of the customers' needs. Some mobile telcos now mix and match different attributes of service plans in an almost infinite variety for customers. It is no wonder that they have up to 10,000 or more distinct customer segments.
Dynamically reconfigurable delivery system - Having mass customised products and services isn't much good unless you can flexibly apply them to each individual customer's needs. This is the other part of smart customisation. With the right configuration tools, customers or CRM front-liners can select exactly the right products and services for each customer. This not only increases customer satisfaction but also significantly reduces costs at a time when each and every dollar saved is welcome. Simple smart customisation has allowed Turkey's Garanti Bank to offer an ultra-personalised credit card [4] that allows customers to mix and match up to 20 different card characteristics until they get exactly the credit card they need.
Lean business support systems - It almost goes without saying that companies should look to become more lean during the recession. That doesn't just mean cutting costs indiscriminately, instead it means remving the waste that exists in each and every process that doesn't add value. Having got to grips with customers real needs through looking at jobs & outcomes, it is relatively easy to identify those activities that don't add value to customers, or that don't support the company in providing value to them. These activities are prime candidates for rationalisation. After all, they don't create any value at all, just cost. This is easily the most effective way to reduce costs in a company if you have to.
Customer value management across the customer portfolio - One of the key lessons about customer-centricity is that you can't afford to focus on all your customers, just the ones that are value-adding to you and where you add value to them. Understanding customers' real needs will help you identify which customers you add value to. They are the ones where your products have a close match with their needs. The rest depends upon carrying out a simple customer valuation exercise across your customer base, to identify those customers who are profitable and those who aren't. The valuation exercise doesn't have to be hugely expensive and require complex equations, it just has to help you identify your most valuable customers. Your most valuable customers may well have changed significantly since as little as only three months earlier. In a recession, you just can't afford to spend limited resources trying to serve customers with products that don't meet their needs, or where you can't possibly make any money from doing so.

So there you have it, five characteristics of customer-centric companies that have a direct impact on success during the recession and afterwards. Ask yourself a simple question: Can you afford not to become customer-centric in this way during the recession?

What do you think? Are you increasing customer-centricity during the recession? Or are you hoping that you will have at least some customers left when it is all over?

Post a comment or email me at graham(dot)hill(at)web(dot)de to get the conversation going.

Tip of the hat to Patty Seybold's post on Use Smart Customization to Recession-Proof Your Business [3] at her Outside Innovation blog for reminding me to write this post.

Graham Hill
Customer-driven Innovator
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