Customer Centricity — Marketing as customer-centric corporate management
Startups and digital businesses from the US are increasingly threatening legacy companies. Their key to success: a more radical focus on humans. Genuine customer centricity requires to rethink all functions and levels. Otherwise, it remains lip service.
1. The choosy customer
Does this sound familiar? Your video streaming provider keeps forgetting which episode you saw last. Then a friend introduces you to another provider who knows exactly where you left off last time, also you can skip the opening credits. Changing providers then only is a matter of minutes, and soon the new provider is happily cashing in.
Only loyal customers ensure the survival of a company — they are the main financiers of a business, placing them in the center of attention ensures economic survival. This insight is not new, but the pathway is — it’s more holistic, more comprehensive, and more radical than ever before. In particular, US companies associated with Silicon Valley have recognized this. Methods such as Design Thinking, Lean Start-up, and Service Design have been successfully applied there for some time now. What these approaches all have in common is a profound orientation toward the customer: Starting with an in-depth understanding of conscious and unconscious customer needs, they align products, processes, and company culture in a holistic and cross-functional way along with these needs. Ultimately, it is about an attitude to create value for customers through which they can not only be won, but retained long term.
Companies in Germany, Austria, and Switzerland are beginning to follow this pathway. This has been confirmed by a study of eleven blue-chip companies conducted by Christian Vatter of the consulting firm Rlevance, and Sarah Seyr, customer experience expert at Swisscom at the time of the survey. We interviewed those leaders who are driving this change, including the Chief Customer Officer of Allianz, the Head of Human Centered Design at Swisscom or comparable positions at Lufthansa, E.ON or Deutsche Telekom.
A more radical focus on the customer is necessary because today, more than ever, these customers have choices. If a competitor offers a more useful product, a more enjoyable customer experience, or a more appropriate business model, customers will quickly switch — after all, alternatives are often just one click away. Only those companies that better address people’s needs and desires, and who consistently fulfill them throughout the entire customer journey, are chosen by customers to be their commercial partner. A loss of significance threatens in particular established brands if a newcomer offers solutions that are more beneficial for customers.
In German, Austria and Switzerland, customer-centric thinking is still in its early stages. For one, Marketing in Germany, Austria, and Switzerland often focuses too much on the pre-purchase phase and takes too little care of product usage, missing the potential of how much of benefit for users can be created during product usage. Secondly, as these countries have a strong engineering background, digital technology is often seen primarily as technology, obstructing the view on how much benefits can actually be realized with it. In contrast, companies from Silicon Valley aim for creating benefits and added value for users through (digital) products, services, features, or experiences. Technology is only the means to an end — because they know that this is the only way for them to stay relevant in the new age of the choosy customer.
2. The hunt for customers and its consequences
The classic recipes for customer acquisition and retention through advertising and sales work less and less in modern days. Today, as media-literate people, we know that the image presented and the reality often differ quite a lot. On the plate, the burger looks different than on the photo, and a check of the small print quickly reveals that the new ‚healthy tea thanks to matcha‘ contains only one percent green tea and 35 percent sugar.
As a consequence, companies are increasing their ‘advertising pressure’, which makes customers feel like the prey in a drive hunt. The very same meaningless message is broadcast through every channel imaginable, web surfers are stalked by retargeting at every move, while Instagram influencers are paid to trick people into believing they see an unbiased opinion. If you look at this situation from a customer point of view, and if you consider that it extends across all product categories, you will discover a cacophony of marketing noise that these hunted customers are increasingly escaping. In consequence, every message that resembles a marketing effort is seen with a massive malus of credibility and thus loses impact.
3. Long-term relationships as a new goal
Customer Centricity and marketing have the same goal: winning and retaining customers. The pathway of Customer Centricity, however, is to create benefits and added values in order to become relevant to people. This increases the willingness to recommend and binds customers for the next purchase. Retention, in turn, reduces acquisition costs and increases higher customer lifetime value.
The new goal, therefore, is to build and maintain lasting relationships. This requires a different approach, as relationship building is fundamentally different from the hunt to close the deal. From psychology we know: relationships develop over time across the phases ‘getting to know each other’, ‘establishing the relationship’ and ‘maintaining the relationship in daily routine’. What you initially heard about your future partner helps at the beginning of a relationship, but what you actually experience with him or her in everyday life determines the quality and duration of it.
In marketing terms, this means: the regular product and service experience, as well as critical incidents, are more important for the relationship than brand image, advertising, and PR efforts. Unlike interpersonal relationships, though, corporate-customer bonds are utilitarianly oriented: customers are only interested in your brand to get a particular job done. Therefore, an excellent brand-customer relationship is the sum of predominantly positive and useful encounters, together with the prospect of further such experiences.
Another aspect is that customers experience the relationship fundamentally differently than companies approach it. One side thinks in terms of functions, e.g. R&D, sales, customer service, while the customer side experiences encounters over time and tries to integrate them into a meaningful whole. The tool “Customer Journey”, which has become rapidly known in the company’s repertoire, helps to shift perspectives: what customers experience along the various encounters is mapped in chronological order — which exposes the ups and downs of the relationship.
Looking from this angle, you quickly notice that customers are concerned with holistic actions (‘getting a device repaired’) and not with the individual interactions that are often measured with the Net Promoter Score (“How satisfied are you with the phone call you just made?”). The order of interactions also plays a role — B after A is not the same as A after B. Of great importance, however, is the experienced interplay of company functions. If one hand acts differently then the other, there is a break in the continuity of the relationship which irritates customers, reduces satisfaction and, in the worst case, breaks promises made. If the customer experiences his provider in such a way as communication impaired, the relationship suffers and is terminated in the worst case.
4. True strength comes from within
A major influence on the relationship is how positive and useful customers perceive their encounters across the entire chain of information, presentation, purchase, use and service, and how consistent these encounters are in their interplay. In consequence, more business functions — and therefore more employees — influence the relationship: internal processes can obstruct the path to useful features, KPIs can encourage call center employees to handle customers as briefly as possible instead of really helping them. This is a significant difference from the current perspective that only a limited number of employees and company functions shape the relationship with customers (which are even often outsourced).
This is where Customer Centricity comes in. In the companies surveyed, approaches were aimed not only at product innovation but also at internal processes, KPIs, structures, and organizational culture. The goal is to align them along with the maxim of lasting customer relationships instead of, as currently, purely along with cost efficiency. This makes customer centricity a management principle, its establishment a management task: it is about changing the objective, and creating the necessary framework to enable customer-centric actions. Accordingly, many of the units in the companies surveyed were mostly located within or close to corporate management.
5. Building blocks along the way to a customer-centric organization
In discussions with the business experts, we were able to identify a number of elements that pave the way to becoming a customer-centric organization. These building blocks can occur individually, but in some cases they are mutually dependent. The rule is: the more of these that are implemented, the greater the positive effects on Customer Centricity.
Commitment and support from top management
Everything starts with top management. Customer centricity must be understood, wanted, and supported from the very top. With commitment and company-wide set signs, the senior management paves the way for change and gives the topic the necessary strength to be realized. It must be clear that it is not a matter of temporarily improving customer experience, but that it is about a vision of a fundamental transformation. On the practical side, an internal mission statement, a so-called “Purpose”, that reflects the value created for customers, is of great help. In addition, our experience shows that the integration of initiatives and the linking of objectives at the strategic level is essential.
Deep, qualitative customer understanding
Knowing customers and understanding their unspoken needs is a key competence. A comprehensive picture includes understanding how a product is used and what users ultimately want to achieve with it. This means to complement the obligatory questions of “how often/how many”, answered by quantitative research and Big Data, with answering the question of “why” — what motivation lies behind behavior and opinions. “Thick data” — knowledge gained through psychological, ethnographic, and anthropological methods — helps here. For details, we recommend the excellent article “Big Data Is Only Half the Data Marketers Need” in Harvard Business Review 11/2015. To this end, qualitative approaches must be added to the toolbox. Additionally, a continuous knowledge-gaining process across the complete Customer Journey is advisable rather than doing isolated probes.
Customer-centric interactions and offerings
From our point of view, the core of customer-centric offerings is simplicity, added value, and a positive user experience. Yet not only products or product features can be designed this way, but also service experiences, spaces, complete ecosystems, communication campaigns, or brand identities. The most successful designs are those that consistently follow the customer-centric approach from idea to development and from testing to product launch. This ability is the most widespread within customer-centric approaches, and it is fuelled by a variety of innovation methods and coaches. It is the most commonly used, and often the only one, which falls short of receiving the full effect of customer centricity.
Alternative tools, processes, structures
The choice of internal tools and processes directly affects results, but also affect employee attitude towards a topic. Some of the tools and methods used are now quite popular, e.g., Personas, Customer Journey, or Design Thinking. Next, to enabling more customer-centric products, experiences, etc., they put customer related aspects more into the focus of employees. The term “agile” in relation to processes should also be familiar. Instead of immediately creating final solutions, agile processes first build prototypes, then test, and finally improve them. This way, the process helps to move from prototype to final solution in small, fail-safe iterative steps. This is necessary because of the high complexity of today’s world no longer permits anticipatory planning. Finally, more open, self-organized corporate structures also come into play here, because agility and rigid chains of command hinder each other.
Guidelines & KPIs from a customer perspective
Guidelines and KPIs are designed to evaluate and guide employee behavior. Both binding and rewarding elements have proven to be effective. The choice of indicators needs to be aligned with creating value for customers. The Net Promoter Score is undoubtedly the most well-known but can be taken ad absurdum if it refers to micro-interactions (evaluation of a telephone call), instead of being applied to customers goals (exchanging a defective product). Evaluating employee behavior against guidelines should be with an attitude of improvement (“What can I do better?”), and less as a final evaluation (“How good were we?”).
Initiatives for cultural change
The highest competence of a customer-centric company is the ability to change the mindset. “Only when every mechanic thinks of the customer when repairing the seat have we achieved our goal,” said one of our interview participants. Cultural change is undoubtedly one of the most challenging goals a company can achieve, but in the case of customer centricity, some elements can help. Spreading knowledge about the customer throughout the organization is a method, and making customer feedback for employees experienceable as direct and emotional is highly effective. For many employees, but also for the management, it is enlightening to come into contact with “real” customers again and again and to listen to their stories in an unfiltered way. It also helps to systematically implement case studies and use them for internal communication via storytelling. Also, some companies train multipliers which offer help and spread the idea across the board. Ultimately, a customer-centric corporate culture is about a path of openness, learning, and continuous change.
6. Back to the Future
„To produce customers [that eagerly follow a business], the entire corporation must be viewed as a customer-creating and customer satisfying organism. Management must think of itself not as producing products but as providing customer-creating value satisfactions. It must push this idea into every nook and cranny of the organization.”
Sixty years ago, the marketing mastermind Theodore Levitt wrote these lines. So what’s new about Customer Centricity? Certainly not the method of focusing on the customer. This message is repeated like a mantra, even if it often doesn’t seem to have arrived. What is new, however, is the consistency and methodology with which this path can and must be taken today. And it is even more necessary today, as the business world is characterized by hyper-competition from globalized offers, as well as by increasing service demands from customers. And it is even more possible, as digitalization makes it easier to satisfy wishes and needs than ever before.
Consistency in this case means above all integration and a holistic approach — from providing orientation via a mission statement, over tools, processes and guidelines to user-centred, valuable offers and encounters. As a result of increasing specialization, we run the risk of thinking fragmented — in performance marketing, big data or technical innovation. However, customers perceive corporate actions holistically and feel when they are really taken seriously and are put in the center of attention. They appreciate this because it is easier for them not to have to rethink every (purchase) decision in a world of abundance. At the same time, they are much more willing to change providers if they feel they are not sufficiently catering to their needs.
Integration and a holistic approach are based on management that sees its core task in inspiring and facilitating long-term customer relationships. For marketing as a discipline, there is an opportunity to generate value for the entire company and strengthen its position by becoming a relationship maker. Finally, Customer Centricity can become the guiding principle which technically driven digital transformation processes lack so urgently. Finally, Customer Centricity can become the guiding principle, that processes of digital transformation so urgently require.
Also, customer centricity gives people within organizations a new, motivating meaning: the value of their work is no longer determined solely by the pursuit of profit, but by the benefit and added value for the customer. People who work in a customer-oriented company feel more sense in their work, have more fun, and are prouder of their organization.
Ultimately, customer centricity means a more human form of doing business and is a sign of maturity and growth. Orientation towards human beings is a ‘higher purpose’, the highest goal that a company can pursue. Because: Only an economy that revolves around people is a meaningful economy.
Together with Sarah Seyr, by the time Customer Experience Expert at Swisscom AG, Rlevance was investigating the question of which routes companies in Germany, Austria and Switzerland take to better adapt to customers. Leading executives from eleven large companies such as Lufthansa, Allianz and Deutsche Telekom were interviewed and asked about their experiences, challenges and recipes on the way to becoming a customer-centric company. Available in German only.
Christian Vatter is a psychologist and founder of Rlevance, a Berlin-based consultancy for innovation, brand strategy and customer experience. His mission is to make companies relevant for customers in the long term. Rlevance’s clients range from blockchain start-ups to well-established car manufacturers. www.rlevance.com