Profits, purpose and people. And why you shouldn’t be satisfied with satisfied customers
Peter Druckers states:
The purpose of business is to create and keep a customer.
There’s no business without customers. The customer is the most important part of the value stream but Ackoff reminds us that an enduring commercial future requires the social system of stakeholders to be taken into account.
W. Edwards Deming explains:
The aim for any company is for everybody to gain — shareholders, employees, suppliers, customers, community, the environment — over the long term.
Shareholders expect return on their investment. Successful business requires loyal customers, a forward-thinking business model, continuous strategic innovation, sound economics and ever improving operational effectiveness. Customers want their problems solved — they want help to achieve whatever it is they’re doing without friction. Employees wish for meaningful work with opportunities to learn and be creative in an enjoyable environment that provides job security. Suppliers desire a trusting and equitable partnership. Society wants to see ethical behaviour, responsibility, and accountability.
CEOs want customers to be happy but they’re under pressure to realise increasing shareholder value year on year. Balancing short-term demands against long-term needs is a fundamental challenge for executive management. Business is a long-term game often being played with short-term thinking. It’s reasonable that shareholders receive a decent return but not to the detriment of customers, employees, suppliers and society; not to the detriment of a company’s long-term health and ability to compete. The best way to serve the interests of shareholders is to forge enduring relationships with customers that create loyalty while balancing the legitimate claims of other stakeholders.
Customer loyalty is key to sustaining profitable growth
From a company’s perspective, it’s important that customers continue doing business with them, increase the amount they spend, and share their happy experiences—or at least refrain from saying bad things. But loyalty is more than that. Loyalty is when customers turn down a superior product or a better deal and stay with the same company. Loyalty is when customers don’t even contemplate looking around for alternatives. Loyalty stems from taking great care of customers. A company needs to earn the trust of its customers and needs them to know it is honest.
Customers want to be understood and they hope someone listens to them, so the experience they get when they interact with us should let them know we care about them as a person, we’re interested in what they have to say, we want to understand what they’re trying to do and that we want to help.
Customers seek help with some aspect of their life because they want to succeed in what they’re doing and feel happy doing it. At the very least we must solve their problem simply and make things easier for them. Even better to anticipate and address future problems before customers actually encounter them.
A company must make it easy for customers to do business with it. We should invest ourselves in our customers. We should give customers our creativity, our ingenuity, our passions and our emotions. That investment should be explicit so that customers know we’re here for them and that we’re in it for the long haul. The emotional side of interactions with customers should be addressed out in the open. They will probably teach us something. Customers will appreciate the transparency and authenticity. Feedback from disgruntled customers or customers who are having difficulties should be accepted positively and put to good use by informing improvements that make things easier. No matter what our job, we all work in customer service. As part of our day-to-day work, we must act deliberately to improve the end-to-end customer experience, reduce customer service costs, and decrease customer churn.
Customers are potential marketers
To make a personal referral a customer doesn’t want to look bad in the eyes of her friends. Beforehand she wants to be absolutely sure her friends will get good value from the company and will be treated right. Rationally, a customer must believe that a company offers superior value in terms of price, features, quality, and ease of use. Emotionally, a customer must feel good about her relationship with a company. She must feel valued. She must believe the company knows her, understands her, and listens to her. A delighted customer is sure of all these things. Delighted customers become enthusiastic promoters to their friends and colleagues. And a growing community of promoters is a catalyst for innovation and a company’s most valuable asset for growth. Now that’s a capability that indirectly best serves shareholders.
Up close and personal
Listening to customers only goes so far. Why not co-create what customers actually need with the actual customers? Offer customers an active role in the design of the products and services they desire, where they can make meaningful contributions and have valuable input to important decisions. Collaborating with customers not only taps into their collective knowledge and creativity, it provides a facility to quickly and continually test our ideas and validate their needs. From this we gain insights about possible directions to take, what to prioritise, and how much to invest.
Profits, purpose and people
Customers are becoming more aware of profits made through unfair or misleading pricing, or from poor quality products, unreliable services, or poor user experiences. Fred Reichheld called these bad profits. Profits made from disgruntled customers damage the customer relationship, tarnish a company’s reputation, and hurt its market performance. To create an exciting, remarkable end-to-end customer experience winning the hearts and minds of customers must be a part of our purpose. When we buy into the accounting view of work and fixate on the pursuit of profits over the customer experience, our capabilities to create value for customers are drastically reduced. Profit is necessary and affords us the freedom to do good for customers and to get better at doing it.
Stephen Denning proposes that the purpose of a company is to delight its customers by delivering a continuous stream of value starting early on. Doing something good for others is inherently motivating. When we make someone happy, the joy we feel comes in part from the joy we spark in the other person. The meaning we see in our work isn’t in the work itself, it comes in the reactions and responses from people for whom we are doing the work— it comes from their enjoyment of the experiences we create. The meaning we see is related to the people and not the things.
Our challenge is to develop capabilities to continuously find new and surprising ways to delight customers that are effective and economical. The pressure to deliver easily distracts us from the necessary attentiveness to delighting customers. When we shift our thinking from what’s being produced to the person, what they’re trying to achieve and why they want to achieve it, this opens up all kinds of possibilities for the customer, which probably hadn’t been considered. If we don’t do this we’re doing customers a disservice. When we focus on people and not things we stand a better chance of delighting customers.
Don’t settle for satisfied customers
Customer satisfaction is a state of mind that customers have about a company when their expectations have been met over the lifetime of a product. But satisfaction isn’t enough because satisfied customers are usually quite passive. Faced with increasing choice and diversity, customers are beginning to demand products that not only meet their desires and expectations but also meet unrecognised needs. They want to be wowed. If a customer’s experience using a product fits a pattern they’ve come to expect, they’ll think it’s boring. Customers are starting to vote with their feet.
Delight is a great pleasure. Pleasure is a fleeting positive reaction to something experienced, which has sensory and emotional aspects.
The Kano model offers some insight into product attributes perceived to be important to customers.
- Basic attributes: Features a product must have in order to enter a market or meet the basic demands of customers. Table stakes.
- Performance attributes: Characteristics associated with task performance. Better performance makes customers happier because they can complete tasks more easily and more quickly. The price a customer is willing to pay for a product is closely tied to the value they place in the performance attributes.
- Excitement attributes: Usually unforeseen by customers. They hold great potential for wow if they connect with customers and trigger impulsive desires.
On this basis we can deploy our creativity to produce products so that customers:
- derive simple pleasure from using basic features to complete their tasks and achieve their goals.
- are impressed by the quality and performance because they exceed their expectations and give them a sense of good value given the price paid.
- are pleasantly surprised by unexpected features that spark their imagination as they discover needs they have never thought about before and invent new ways to use the product.
Of course, we can’t really understand what aspects of a product will specifically delight customers. At least until we have seen their reactions to what we have created, given our understanding of what they’re doing and why. Customers probably don’t know what will delight them until they’ve had the opportunity to experience what we’ve created. This is why customer-driven iteration is so powerful. Iteration helps us keep investing a little at a time as we hone in on what customers truly need. Our aim is to deliver the simplest possible thing, and deliver it so well it delights the pants off customers.
There’s opportunity to make digital lives simpler by using technology more appropriately so it doesn’t get in the way. Products need to put people in control of what they’re doing and quickly integrate into their daily routines without technology interrupting their life. There’s an innate elegance to simplicity that’s about aesthetic appearance, interaction experience, and performance characteristics combining seamlessly to facilitate a customer’s entry into flow for the task they’re performing. If we can remove complications and make it easier and smoother for a person to become completely absorbed in what it is they’re doing, because the product is pleasurable to use, then maybe we can amplify their delight to a deeper feeling of gratification. If we can keep coming up with ways to tap into unrecognised needs, to sprinkle the wow factor so there’s always something new and exciting, then we can keep stimulating intrinsic responses from customers (by stimulating the limbic system in their brains, where feelings live and busily influence decisions the neocortex thinks it makes logically). For delight to be meaningful, well, I figure that has to come from the customer because it relates to their purpose, not ours. Maybe if they’re doing something because it contributes to something bigger than themselves, and they’re using our product to assist them, then any delight we can create for them just might be that little bit sweeter because it was part of a reaction to doing something meaningful.
We should look for opportunities to delight customers not only in their use of a product, but also by engaging with them in the co-creation of the desired product and all the way along the end-to-end customer experience. Humans are wired to be creative. What kind of delight might customers experience if they were proactively co-creating the product or service they desire with a company? It feels good to be involved — to have a say. If their involvement somehow reflected their purpose, and the act of creating something useful and of quality gave them meaning, then customers might be stimulated beyond simple delight. The customer relationship must be one where customers pull what they need from a company. When they need something we’re there for them, otherwise we stay out of the way. Could we be an understanding, supportive, inspirational friend? Let’s continually invest in the ongoing customer relationship so that it always provides customers with a positive memorable experience of the company.
Delight isn’t more customer service
Creating the right product is borne out of extended conversations with customers. To improve this there needs to be a shift from creating products for customers to creating products with customers — the customer relationship needs to become a collaborative partnership in which they feel energized and excited rather than used and unimportant. This is a change in mindset as well as a change in how the work is done. If a company is to develop the capabilities and opportunities to delight customers then it must genuinely appreciate and care for its customers. Listening to customers is a start but the toughest challenge is knowing what they’re truly feeling. Customers will only fully engage and really let you get to know them when they feel valued.
To be so focused on profits increases the likelihood that they are in fact bad profits. I wonder if companies are so busy being busy they have no time to think about what’s truly valuable to customers let alone how to actually delight them. Any thinking done on this is probably trapped upstream in various marketing activities, research, or concept design work. Any notion of customer delight stays in this imaginary world because the daily grind of building feature after feature doesn’t allow the people building the product to take the time to think about customers, really understand them, and further develop ideas that evoke delight. Typically, an organisation structure keeps these people away from customers. Corporate innovation initiatives rarely make any impact because they’re preoccupied with being labelled innovative or playing with the latest cool technologies rather than actually being innovative in the service of customers. Creating delight for customers should be imbued in every thought and action. It should be engrained within the DNA of a company. The process of building a product should be fuelled by exciting discovery and valuable learning about customers, their world, and their ambitions.
Enduring customer loyalty creates a meaningful advantage in the marketplace that’s difficult for other companies to compete against. Enduring customer loyalty comes from continually investing in the customer relationship to make it an equitable partnership. Customers aren’t always right and they don’t always know what’s best. Stakeholders don’t always appreciate the business and financial benefits of software quality in terms of reduced rework and the cost and speed of change. They’re all human. We must be mindful of this.
Stanley Marcus reminds us:
You achieve customer satisfaction when you sell merchandise, that does not come back, to a customer that does.
Delighting customers or surprising them is an amplifier that helps create what Seth Godin calls sneezers — people who actively work to spread the word from customer to customer. If we can create more positive emotions in every interaction customers have with a company, not just with the product, then we not only increase their lifetime value, we also increase the chances of them becoming advocates for the product and the company.