Customer-Centric Success: 6 Symptoms for Concern
“We put the customer at the heart of everything we do” is a slogan advertised proudly on glossy posters on numerous organization’s walls. But, in this digital age, businesses need to urgently assess what this commitment to customer-centric values means. Has it become a hollow promise? A promise designed by the marketing team to tick the ‘customer centricity’ box but without any underpinning foundation, strategy or framework to make it happen?
Once upon a time, it was acceptable to prioritize the creation of robust internal processes, procedures and rules within companies, despite them adding treacle to the customer journey. However, while governance is still critical, in a world of new, innovative, agile competitors and ‘everyday’ disruptive technologies, the cost of failing to transform for today’s needs of smarter, more expectant customers can be fatal. It’s impossible to imagine a world without Airbnb, Uber or digital wallets. Customer centricity matters more than ever:
“Customer centric companies are 60% more profitable compared to those companies who are not focussed on the customer” (CMO.com)
“A 10% increase in customer retention levels result in a 30% increase in the value of the company” (Bain & Co)
“A 2% increase in customer retention has the same effect a decreasing costs by 10%” (Emmet C. Murphy)
In order for an enterprise to become truly customer centric there must be evidence that they are putting the customer at the core of the company in such a way that it influences the business decisions they make. It includes creating a mindset across a connected organization whereby everyone is focused on creating long-lasting value for the customer. It’s far more than “customer satisfaction”, “customer obsession” or Customer Relationship Management (CRM).
There are a number of critical success factors in creating a customer centric organization and a wide variety of impediments – often dangerously hidden below the executive radar. In the following sections, we lay out six common symptoms that contribute to poor customer centricity. They are based upon practitioner knowledge, research and experience within today’s business-to-business environment.
1. Not knowing your customers, the world they live in and how to excite them
The most successful organizations are perceived by their customers as an indispensable part of their lives. They want a trusted adviser, integral to their business, who not only provides solutions to known problems but also keeps them one step ahead, anticipating opportunities and disruptions. Six common issues:
Failing to understand customers’ challenges
Before we can decipher what propositions, services and support structures to build we must first understand the challenges customers (and potential customers) are facing and what problems they are trying to solve. We need to immerse ourselves in their environment, look at the world through their eyes and try to imagine being a part of their company. This is not a one-off exercise – in an ever-changing world, it needs to become an ongoing formal and informal activity.
Not participating within the customer ecosystem
It’s vital to establish the ecosystem that customers reside within, i.e. the partners, suppliers and other fast-moving third parties that collaborate together. Between them, these players offer an invaluable source of intelligence regarding the customers’ landscape from alternative and objective perspectives. It also enables the business to gain credibility from being a part of a wider supply team. This learning is not the sole responsibility of the front-line customer-facing teams, but every function within the organization.
Not knowing who are the most important customers to the organization
Without operating with a formal customer segmentation model and understanding who are the most valuable existing and potential customers, the business will not be able to focus valuable resources on the sweet spot opportunities. The worst outcomes include high attrition rates (of the most important customers), missed cross-sale opportunities to increase margins and a lack of new profitable customers.
Failing to teach customers by leveraging data insight
It’s not enough to simply ‘manage’ customers – front-line account managers must ensure they are perceived as trusted experts by customers. They must provoke customers into action by challenging them about their business and suggesting solutions to problems they may not have even identified themselves. Digital content, gleaned internally and externally, is a massive area of opportunity to unify customer needs and solutions – and in a way that is unique to the relationship. As such, a ‘continual learning’ ethos must be built to ensure teams keep abreast of disrupting forces, industry developments, customer issues and potential strategies.
Engaging with customers randomly and without coordination
Far too often the method and frequency of customer communication are left lazily to chance. For example, advertising might be circulated uncoordinated from within certain departments; pricing communications may be timed to suit your Finance department; hospitality invitations may be sent ad hoc from executives to random friends; operational notices might be sent out independently to different sets of customer contacts. Customer engagement must be orchestrated in harmony with the segmentation model. Messages should be timed religiously to maximize (or minimize) their impact. And the variety of today’s converging technologies, via physical and digital channels, needs to be exploited in a way that suits the customer – from simple ‘transactional’ styles (e.g. online) right through to executive-sponsored, face-to-face engagement.
Failing to bring customers ‘inside your tent’
A vital shortcut to understanding the needs of the market while cementing trusting relationships is to include customers in the development of your business or product strategy. Ignoring the opportunity to collaborate on areas such as product innovation, developing market dynamics, disruptive forces etc. creates the risk of building services and solutions that are not relevant. For example, modern businesses are fuelling collaborative innovation by opening up their APIs (Application Programming Interfaces) to customers and partners alike. APIs effectively help businesses integrate more seamlessly with each other by creating a common platform and language, breaking down barriers.
2. Obsessing about products
Struggling companies are often proven to be far too product-centric – they build products and services and then seek as many customers as possible from which to make money. The financial goal for these types of businesses is to maximize the value created by each product, with targets set accordingly within the product or marketing silos of the business.
Successful companies build relevant and sustainable ‘propositions’ that create demonstrable business value for customers. Three common issues:
Focussing on ‘market share’
A major key performance indicator for a product-centric organization is market share – measuring the volume of product sales within the overall market pie. But customers are demanding a more personalized and customized value from ‘business partners’. As discussed earlier, they desire trusting relationships with solution providers. So, rather than thinking about our ‘share of wallet’ it is more appropriate to consider our ‘share of needs’. In other words, we should be asking ourselves “What share of our customers’ overall business needs are we meeting?” and “How much of their overall life could we be participating in?”
Rather than simply measuring the income or market share delivered from each product, we need to be focussing on the value created by each customer.
Products being developed within a vacuum
Feedback and knowledge about the market landscape are not the sole responsibility of any one department. It should be a personal aim of everyone in the organization. As such, it’s key that the proposition development function creates a collaborative process to ensure the widest possible feedback. A formal, transparent, cross-departmental proposition roadmap governance process should be constructed to include a representation from sales, account management, marketing and IT as a minimum. The board agenda should include an opportunity to discuss market developments, the sales pipeline and specific feedback from the front line regarding customer needs. Customer input should be included as discussed earlier.
Prolonged development cycles in the search for ‘perfect’ products
Given the pace of change and the need for the organization to stay competitive, agility within the product development process is of paramount importance. It is better to create solutions that are 80% complete than to await a perfect set of solutions that miss the market opportunity. In most situations, customers expect propositions to be refined, adapted and improved, so long as they deliver the advantages they need to stay ahead of their competition in the meantime.
3. Building a fragmented, internally orientated organization
The empowerment of front-line customer-facing staff is critical in a customer centric business. It is likely to be destroyed if the rest of the organization is not brought into line to support them. Cultural issues aside, the location of authority in the organization structure, and the structure itself, are crucial factors in implementing a successful customer centric strategy. Three common issues:
Creating individual, product-orientated profit centers
The least suitable operating scenario for customer centricity consists of a business with many individual P&Ls, misaligned business agendas, silos of internal departmental targets and internal politics. Successful organizations align and empower resources across a unified organization with a customer mentality. In an ideal world, this means building an operating model around customer segments – not competing product or service lines. We must start with the customers’ needs and build solutions from the various capabilities we have to offer rather than torment the customer with inconsistent pitches from a number of product lines motivated to optimize their own department’s performance.
Lack of an executive accountability for ‘the customer’
Vital to achieving a shift in culture and behavior across the business is to have a senior-level person accountable for ‘the customer’ such as a Chief Customer Officer. Increasingly more common, the CCO’s objectives are to excite both the leadership and the organization into becoming a one-company customer focussed operation, uniting decision-making and driving cross-company action. Note that this role does not carry the sole burden of responsibility for customers – that is everyone’s to own. Rather, the CCO is the driver of change and the central customer ambassador for the organization.
Lack of resources and skills relating to the customer’s environment
The fastest and by far the most effective way to enhance the market-facing culture of an organization is to recruit people from within the market into which you are selling. Recruits from the customers’ environment will hit the ground running by focusing on the right issues and using customers’ language. They build customer relationships quickly leveraging their affinity to the market and, importantly, tend not to be affected by the internal baggage of the organization given their external orientation. They also become natural ‘market ambassadors’ within the company and can be used as agents of change on the journey to organizational customer centricity.
4. Lack of company-wide tools supporting a single view of the customer
It is difficult to galvanize the organization around the customer without a common, transparent set of tools enabling customer visibility, supported by consistent methodologies relating to customer engagement. Many organizations suffer from ‘cottage industry’ processes and reporting, varying across the various silos and without a common customer-related purpose. Three common issues:
Lack of a company-wide customer relationship management (CRM) system
A CRM tool needs to become ‘the place we live’ for any customer centric business. Commonly mistaken as simply a repository of customer data, used properly it is a strategy for managing all your company’s relationships and interactions with customers and potential customers. It helps you stay connected to them, streamline processes and improve your profitability through better levels of productivity. Once fully mature, CRM tools should join up sales, marketing, operations, service and HR departments as well as third parties within an entire customer ecosystem.
Lack of formal sales methodologies and processes
It is vital that everyone within the front line of the organization (and those in supporting roles) is trained in, and consistently uses a professional sales methodology. Aside from being fit for the role, teams that operate using a recognized and common language operate more effectively and efficiently. This language becomes embedded within the CRM system, helping to set the culture of the business across the business and up to executive levels.
Misaligned planning processes and budget setting
Commonly, annual planning cycles involve the executive teams setting the year’s high-level goals with the finance team determining a budget which then gets cascaded across various silos of the business. This triggers the ritual ‘arm wrestling’ activities within the profit centers that eventually determine the final budget. However, to ensure an injection of customer centricity, it is vital to ensure that the marketing and sales plans, with the associated investment requirements (e.g. from the IT or product teams), are sequenced at the beginning of this process. This will ensure that targets and appropriate levels of investment are based objectively on the market opportunities rather than upon ‘who shouts loudest’. By definition, this necessitates that the planning processes across departments are choreographed as part of the overall group budget process.
5. Leadership failing to ‘walk the talk’
The questions that senior leaders ask internally and the behaviors they model, through their actions and language, are of paramount importance to creating a customer centric culture. Frequently, customers and employees accuse senior executives of being invisible to the outside world. Three common issues:
Focussing on individual profit center performance metrics
Leaders naturally set the tone and sense of priority from the types of questions they ask their teams. They need to be actively engaged in monitoring customer-related key performance indicators right across the organization. For example, repeatedly discussing the levels of customer attrition, or numbers of new customers, with each business function (regardless of the function’s specific internal targets) will align teams around the important objective.
Conversely, demanding reports on individual departmental metrics as a priority will foster introspection and fuel internal competition.
Not engaging personally with customers
Leaders must spend time at the front line of the business to get a customer reality check and keep abreast of current market conditions. They must also support the relationship-building activities vital in retaining and selling to customers. Beyond this, business leaders need to ensure they are attending and presenting at key industry forums promoting their credibility as thought leaders. External engagement cannot be a ‘lip service’ exercise but should be a diarised regular set of activities. Visibly engaging with customers also sets an important example for everyone in the organization.
Not understanding the customer’s journey with your organization
The customer experience when dealing with your organization can be varied, complex, and inconsistent. For larger organizations it may vary considerably depending on the nature of the interaction e.g. when buying something, asking for technical advice, having a service query, etc. Every leader should be taken through a collection of customer journeys and relevant touchpoints to have a true feel for the experience customers enjoy.
6. ‘Flying blind’
As the cliché says “what gets measured gets done”. Regardless of leaders’ best intentions to undertake customer centric plans and activities, they tend to fail unless they have put in place reinforcing measurement and monitoring mechanisms. This need only consists of a small number of key performance indicators, but they should be reviewed religiously at the most senior levels in the organization at regular operational reviews. Frequently, leaders are presented with historical customer metrics (attrition levels for example) when it is too late to intervene. ‘Rear view mirror’ type reporting needs to be replaced with ‘radar’ style dashboards to ensure early warning and allow proactive plans to be initiated. Three common issues:
Lack of common customer-related targets across the organization
A simple but powerful method of unifying customer focus is to create and align cross-company goals. For example, it is common to see marketing and sales teams with completely unrelated key performance indicators despite the fact that one team is obsessed with creating campaigns, collateral, and hot leads and the sales teams are dedicated to closing business using their material. Both teams should share the same sales income or profit targets. Proposition development teams design with much more purpose when their own performance is judged against success with customers rather than product development milestones.
On a softer point, it’s also helpful for all people across the organization to understand exactly how their own role links directly, or indirectly, to helping customers.
Failing to measure the lifetime value of customers
Given the single most important asset in any organization is the customer, failing to define, measure and track the value of that asset is a fundamental blind spot. The specific calculation of Customer Lifetime Value (CLV) can be created from a variety of metrics such as margin, value of future opportunities and probability of churn, but should be tailored to the specific needs of the business and industry. Importantly, CLV is a key enabler for a range of initiatives such as segmentation modelling, marketing strategies, communication planning, customer loyalty, resource optimization and investment planning.
Building key performance indicators that don’t matter to customers
A common mistake boards make is to ponder at meetings over customer satisfaction scores.
Furthermore, they then spend valuable time ascertaining what clever gymnastics they can execute to improve the score by the next board meeting to make everyone feel good about their ‘progress’. They may even compare themselves to their industry peers and set a goal to be in the upper quartile. No customer cares about these scores – but they do care about doing business easily with your organization. If customer satisfaction was your own real passion, you should be setting a goal to be the best in the industry, not simply to be the best of a poor bunch within your own industry sector.
Instead, dashboards should contain the types of KPIs customers might have written down themselves – usually the “why” behind the customer satisfaction scores. Examples might relate to how quickly you respond, how fast you resolve problems, how quickly you supply them etc. They should also include some qualitative metrics such as the reasons behind dissatisfaction, satisfaction, complaints etc. Board meeting conversations should focus on plans to address these areas of opportunity and track the initiatives that underpin them.
Conclusion
With the accelerating pace of change, the disruptive forces of fearless, innovative, entrepreneurs and the proliferation of consumer-friendly digital tools, the need to become truly customer centric has never been more vital. Attention regarding customer centricity has increased markedly in the past ten years, but the topic is often ‘just another item’ on executive board agendas rather than being prioritized as the fabric upon which the overall business strategy should be built.
Transforming to a modern, customer centric organization is a challenging journey that involves both art and science, but also a series of hard and soft interventions. Without a framework to plan, execute and manage a pragmatic strategy, executives’ best intentions risk remaining as hollow promises.