Despite their best intentions, many product centric companies have been unable to successfully transform into customer centric organizations. Research of successful and unsuccessful organizations highlight what is among the greatest challenges facing attempts to become customer centric – the “inherent conflict.”
On one side, they attempt to retain their product centricity and market share mindset. On the othhr, they try to transform themselevs into a customer centric organziation. The two stratgies highlight the inherent conflct between them. product centricity is all about selling the same to all customers. Customer centricity is about selling more of customized value to the right customers people.
The failure to adopt customer centric business models comes with a steep cost. In a world where customers demand individualized treatment, companies that continue operating under product centric business models and treating customers through a one-size-fits-all (OSFA) prism will suffer a number of adverse consequences:
1. Wasted resources – Treating customers through a one-size-fits-all model leads companies to unnecessarily waste valuable resources. Organizations frequently fall into the trap of treating profitable and unprofitable customers identically and do not allocate or prioritize limited resources according to customer value. As a result, the best talent and most expensive channels are often allocated to customers who are often unprofitable while lower quality talent is unintentionally allocated to or extensively used by profitable customers. This scenario, so common among many organizations, has a debilitating affect on the loyalty of profitable customers and the profitability of “lower-end” customers.
2. Sales Misalignment – Under a product centric business model sales personnel pursue orders and respond to customer requests in a disjointed fashion. Closely related to the aforementioned “wasting resources” example, sales will often fulfill countless requests for alignment meetings, escalations and on-site visits to satisfy their customers, irrespective of customer value. Instead of pursuing additional business and concentrating on their most profitable customers, they treat all customers similarly and consequently, fail to retain the current volume of business and generate new business from new and existing customers. Aside from the effect on customer loyalty and their own P&L, this leads to lower employee productivity and morale.
3. Disappointed customers – As customers increasingly seek personalized experiences, they will ultimately reject a one-size-fits-all value proposition. This disappointment will not be relegated to customer satisfaction metrics in surveys but will manifest itself through decreases in the size and frequency of purchases, higher attrition, negative word of mouth and increased demands for discounts.
4. Unproductive working environment – The lack of coordination between customer facing and non customer facing business functions often results in organizations constantly operating in “crisis mode” characterized by a chaotic, frenzied and jaded environments adversely affecting customers and employees alike. This chaos not only wastes limited resources but demoralizes employees who are trying to perform their jobs effectively and help customers. Moreover, chaotic work environments impede an organizations’ ability to innovate the customer experience and provide value to customers during each interaction.
5. Decreased loyalty – One-size-fits-all treatment of customers ultimately fulfills the needs of only a small portion of customers. Many companies fail to recognize that there is no such thing as an “average” customer. Each customer is different and has unique needs that need to be addressed or else they will seek a competitive alternative that better fulfills their needs. However, rather than focusing on the impact to customer loyalty, executives focus on cost reduction initiatives and process redesign programs – issues rarely of concern to customers. When these executives finally recognize that they are not delivering the right value to customers, they discover that improperly designed cost reduction initiatives and one-size-fits-all processes come at a steep price – customer profitability and loyalty.
During the course of a consulting engagement, Strativity Group discovered that although a number of customers had outstanding invoices that were overdue by at least one year, sales personnel nonetheless continued taking orders and approving product shipments to those clients. Similar scenarios take place in many siloed companies where departments operate without visibility into complete customer value and history, enabling customers to take advantage of corporate blindness and continue receiving products without paying for them.