Dictatorship of the Customer

(Chapter 5 from Transform: A Rebel’s Guide for Digital Transformation)

Rise of customer power

They say in marketing that the customer is king. The customer was never treated as much of a king, though. The customer was expected to be a good consumer and to buy what marketing and advertising told them to buy. The employee was expected to be a good and loyal worker and to do what their bosses and the communications department told them. And all was good from an organization-centric point of view, because organizations had pretty much all the power.

Unequal relationships inevitably lead to abuse. For a long time, there has been an unequal relationship between management and employees, and between the organization and its customers. It used to be that management controlled all the key tools of organization and communication. It’s hard not to be abusive when all the power is on your side.

These abuses were not always deliberate or even planned. It is simply very hard for the stronger party not to take advantage of the weaker one. History is about gods, chiefs, dictators, kings, and institutional power. Its script is about the deification of leadership and godlike vision of “great men”. To expect deference from employees and customers was thus normal practice. It reflected the natural order of things.

There were compensations for employees who submitted themselves to the wishes of the hierarchy. If you did what you were told and showed appropriate deference then you had a reasonable chance of lifelong employment. If you were male and had talent and ambition you might even become king one day, or at least a prince.

Many organizations were benevolent dictatorships. They treated customers reasonably well. But, in general, unless there was strong competition, customers were exploited. Ironically, the most loyal customers tended to be treated the worst. The potential customer was king — as long as they were “potential” — and was promised everything, while the loyal customer was used as a “cash cow”, milked for heavy profit.

The arrival of the Web was an extinction event for that old model. The Web is a mega-organization of customers. It makes widely available to employees and customers a flood of information and a vibrant network and set of tools within which to organize. Suddenly, employees and customers were no longer so dependent on traditional brands and organizations. They have Google, Facebook, Twitter, etc.

We are thus seeing a rebalancing — an equalizing — of the relationship between management, employees and customers. It’s a very good thing because in balanced relationships, where each party has roughly equal power, there is a chance for real respect and genuine trust. We have the foundations for developing more robust relationships based on transparency and honesty. What could be more fertile ground on which to build loyalty and sustainable business models?

Being customer-centric

I remember one afternoon that I sat in an almost empty Starbucks café. At the next table, a Starbucks regional manager was doing reviews with staff.

“You’ve got a problem,” he said in a low voice to one of them. “I’m getting reports that you’re handing out lattes that are not filled up to the top. Why is that? Did you not want to hand it back to your colleague? Did you think they wouldn’t be your friend anymore if you were seen to be annoying them?”

The conversation went back and forth but the manager kept stressing that the customer must be the absolute focus. Your fellow employees are NOT the customer, he stressed. Focus outwards, not inwards. This is service thinking. This is outcome-based management. This is customer-centric thinking, and outside the service industry, it is rare. But, of course, we’re all in service now.

Service cultures can make for challenging workplaces (as anyone who has worked in Amazon will surely attest). Many employees seek a comfortable life with as little hassle as possible. In traditional, non-service-oriented organizations, one way to make your life as a worker easy is to ignore the customer. Make them fit into your schedule, learn your lingo, your processes, your logic, your way of doing things.

“It’s kind of arrogant to think the only reason people exist is to use what you built,” Facebook’s director of product design, Margaret Gould Stewart has stated. But that is exactly the way it used to be. Many in traditional IT felt that the customer and employee should feel honored to read the manual — which they couldn’t understand anyway — so as to use the technology they were privileged to be allowed to use. That’s how it used to be. That’s definitely not how it is now.

The challenge is that as we need to become more empathetic, the opportunities to develop empathy are declining. It is easiest to develop empathy when you are physically with someone. However, when someone is lost on your website or confused by your app, you don’t see them. You are removed from their world, and that makes it harder to develop empathy for them. They’re just a “user”.

Jack Dorsey, creator of Twitter and founder and CEO of Square, has stated that, “It’s time for our industry and discipline to reconsider the word “user”. We speak about “user-centric design”, “user benefit”, “user experience”, “active users”, and even “usernames.” While the intent is to consider people first, the result is a massive abstraction away from real problems people feel on a daily basis. From this moment forward, let’s stop distancing ourselves from the people that choose our products over our competitors. We don’t have users, we have customers, we earn. They deserve our utmost respect, focus, and service.” (What does the drug and the Web industry have in common? Users, traffic and HITS.)

Digital touchpoints are oxymorons. They close down human-to-human interactions between the organization and the customer. The only things being touched are screens. So, in an age when the customer has never been more powerful, cynical and impatient, we have never had less opportunities to develop empathy for and understanding of our customers.

That’s your job! There’s nothing more important you can do. Nothing. You must be the voice and the champion of the customer within your organization. You must find every opportunity you can to show the actual experience of your customers to as many employees and management as you can. (The Task Performance Indicator, which will be described later in this book, is a method that helps you do exactly that.)

You will be the most empathetic professional around, knowing and understanding your customers’ needs and how they behave in an online world better than they do themselves. You’ll know exactly their top tasks and how to make them more findable and doable, and you’ll know their tiny tasks and how to make sure these don’t get in the way of the top tasks. And here’s the first step in developing empathy: stop calling them “users”. Call them customers, people, students, nurses, engineers, employees. Humanize them. Give them human names. Empathize with them.

Loyalty is for suckers

Did I say that the customer is a dictator these days? The organization used to research the customer. Now, the customer researches the organization. They love the power a good search engine gives them. They love to review and give their opinion, knowing that social media is their megaphone and connector. This demanding, impatient and skeptical customer will become increasingly hard to serve and keep happy.

It won’t be easy to be seen as the customer champion. You’ll be adding to the workload of your fellow employees because the customer will demand that you make things incredibly simple and convenient. That means that you will have to go to your co-workers and ask them to make their work lives more complex and less convenient. And being a customer champion in an old model organization nearly always means that you will be in conflict with senior management objectives trying to push sales to potential customers at all costs, and exploit and overcharge current customers as much as possible.

Your future will be built on making life easier for current customers because that’s where the true value of organizations lies.

· A 5% increase in customer retention produces more than a 25% increase in profit.” (Fred Reichheld)

· 80% of future revenue for brands will come from just 20% of the existing customer base. (Gartner)

· It costs retail banks as much as six times more to attract a new customer than it does to retain an existing one. (Ernst and Young)

· Typically, it takes more than 3.5 years for a telecom company to break even on its subscriber acquisition cost. However, the average customer stays only about two years. (Ovum)

Why are loyal customers more valuable than potential customers?

· They buy more.

· The operating cost to manage a loyal customer tends to go down over time.

· Loyal customers tend to refer other customers. Loyal customers are the best possible social media strategy.

· A recommendation from a current customer is one of the few things that potential customers still trust.

· Current customers are often willing to pay a premium to do business with you because they are familiar and comfortable with you, and they don’t want the hassle of switching.

And, boy, do they end up paying a premium! For decades, many brands have taken their loyal customers for granted. Not just that. They have actively exploited these loyal customers’ willingness to pay a premium, and have milked them for all they were worth. For example, many loyalty programs are deliberately designed to make customers less price sensitive by the use of emotional gimmicks. In other words, many loyalty programs are designed to overcharge the most loyal customers. As a senior executive once said to me: “If you get a gift out of the blue from us, then you can be certain we are absolutely creaming you for profits.” At the same time, organizations have chased and chased potential customers, promising them everything under the sun. $40 billion is spent on digital advertising in the US on an annual basis, while between $2 and $5 billion is spent on designing services, according to Chris Risdon of Adaptive Path.

Because of the Web, more and more customers are finding out that they’re being exploited and ripped off. They’re not happy. Loyalty and trust, as we will see in later chapters, are nose-diving. In 2013, for example, Accenture found that customer switching costs companies almost $6 trillion every year, and every year more switch.

Organize around the customer

We have a department of selling to the customer, a department of marketing to the customer, a department of communicating at the customer. We have a department of support for dealing with customer complaints.

None of these departments really care about the customer, with the possible exception of the support department, but then support has very little prestige within an old model organization. Unless you’re a company called Slack. In 2015, I had the pleasure of hearing Matt Haughey speak at An Event Apart conference. Matt is a real pioneer in the web industry. He is currently working with Slack to help their customers. Slack is a company that is revolutionizing the digital workplace. When I heard Matt talk about Slack at An Event Apart, my first thoughts were: “Can’t be possible! Do companies like this actually exist!?” Matt explained that “customer experience is the second biggest group employed at Slack,” and that the foundation of customer experience is good support.

· Every new employee does at least two full days of working the support queue.

· Designers and engineers do two hours per week of support, forever.

· All our support stuff is integrated into Slack, so you can see every ticket ever, review answers, etc.

· A weekly summary of support is sent on Monday mornings about the previous week in our general channel (which is very low traffic, announcements only).

Slack is a company that genuinely invests in the customer experience. And it pays. “Slack stands on the precipice of product mega-fame,” Seth Stevenson wrote for the Wall Street Journal in November 2015. “There’s a decent chance you haven’t heard of it yet, and it sounds almost banal in description: software that helps groups of co-workers exchange instant messages and swap electronic files. Yet Slack is, by some estimates, the fastest-growing business application of all time.”

Slack is a company where the desire to really help the customer is in the DNA of every employee. It is not just some phony marketing, advertising, PR communications propaganda about how “we care”. Crazy as it sounds, Slack actually does care about its current customers. And because they treat their customers incredibly well, they’re doing incredibly well.

Back in the old model organization, the customer champion — if there even is one — is a lonely, isolated voice, constantly trying to defend the interests of the customer. It’s hard to be a customer champion when other departments have targets to meet that involve exploiting and annoying customers.

This is your challenge if you see fit to take it on. It is full of the amazing potential that always exists when one model dies and a new one in born. These sorts of times don’t come often — most probably it is a once in a lifetime occurrence — when someone not in a senior management position can make a big, big difference. But it is fraught with danger and threats, as is always the case too. Because the old model organization won’t die easily. It can linger on for quite a while, and become all the more vicious in its death spasms.

I remember once sitting in on a presentation where a bunch of marketers were presenting new product ideas and programs. Almost in unison, they said to the web manager: “And we’ll be coming to you to get a banner on the homepage.” The homepage was a cluttered mess and research showed that customers hated it. Most of the week for the web manager was spent fighting off requests for banners and other marketing and management ego fluff.

This website had a huge carousel for its banners. The web manager readily admitted that it was useless, that in fact it was counterproductive and was losing sales. But he said that the reason they had it was to keep marketing and management ego at bay. He called it the “Carousel of Egos”. “They like interactive things and they like being on the homepage,” he said. “Things that move and are flashy and that dominate the page they think will dominate the attention of the customer. They like to think they’re in control of the message. And you can essentially deal with 5 ego requests in the one space with a carousel. So even though hardly anyone looks at it or clicks on it, it does keep our managers happy.”

This old model of organization-centricity and ego is still rampant today, and this is what you have to deal with. You might decide to give the homepage to the Egos because that a battle you know you’re not going to win. And anyway, you know that every year the homepage gets less and less visits as customers find what they want through Google and external links.

So, it’s very unlikely you can introduce the new customer centric model on the homepage. You find somewhere else, like a particular product page, or maybe in support. You may have to wait. You may require more evidence of how treating customers well is the best possible business model. Keep collecting that evidence. Be patient because the movement of history is on your side. The world of the old model organizations is burning as trust collapses.

Read the next chapter: Collapse of Trust

Read the previous chapter: Golden Age of Digital Designers

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Reichheld F. & Schefter P. The Economics of E-Loyalty, Harvard Business School, Oct. 2000

Lawrence, A. Five Customer Retention Tips for Entrepreneurs, Forbes, Nov. 2012

Ernst and Young. Understanding Customer Behavior in Retail Banking. The Impact of Credit Crisis across Europe, Feb. 2010

Cary, C. Telcos Must Turn Big Data into Smart Data to Manage Customer Churn and Loyalty, Aug. 2015

Dorsey, J. Let’s Reconsider Our “Users”, 2013

O’Reilly, L. Facebook: We Don’t Call Them ‘Users’ Any More, We Call Them ‘People’, Business Insider UK, Dec. 2014

Stevenson, S. Stewart Butterfield, Email Killer, WSJ Magazine, Nov. 2015

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