When Is The Customer Not Right?
We’ve all heard the cliche saying, “the customer is always right.” And, for the most part, it is true that the customer is “always right.” After all, it is the customer’s money that contributes to a business’ revenue. It is the customer who validates a product’s place in the market. Clearly, the customer is the primary focus in the equation…right?
However, what if this is wrong approach? What if we’re placing too much value on the customer to the point in which the customer defines the business instead of the business defining its customer? With such a convoluted web, a lot time, personnel, and money is invested by the business in order to acquire any new customer. Therefore, the business places immense value on each customer due to the resources it has devoted to gain that customer. While every customer is appreciated, not every customer carries the same value. If you place too much value on a single customer, it can impede the functionality of the entire business — so, finding the right balance is important.
I see it on a frequent basis within my own company. Our employees get tied up with clients that go from satisfied to churn risk in the blink of an eye and usually because improper expectations are set, or deliverables are over-promised. Our sales personnel that are the most successful are the ones who clearly define the scope of the product to their customers, and when there are issues it’s normally a legitimate bug that needs to be addressed. Our service people who are in leadership roles got there because they have consistently been able to corral their customers within the scope of the product. However, when we don’t do this, we waste valuable time “herding cats” because our customers did not fully grasp what the product is, or their situation did not stay within the scope of what we offer. When this does happen, it forces us into a nearly crippling log jam that ties up entire divisions of our company, which is not a good experience for our other customers. But, God forbid we risk $1000 in monthly revenue…Which exposes a fault in the model we’re looking at now.
Starting off in the red at the point of sale is not good, and you have to retain the customer for a significant period of time just to get in the black, and then even longer just to be profitable — which is why some companies freak out when a “small” customer is at risk to churn. This, of course, creates a slippery slope, because then the business has to play defense and meet each customer’s needs — where as the ideal model would allow the business to proactively address customer needs before they’re a churn risk. The constant demand of customer needs/wants will continue to stretch the product out of scope to the point that reaches its limits, and that’s when over-promised deliverables fail to meet customer expectations. Unsatisfied customers churn, and existing revenue is lost to a competitor.
So, there’s an obvious problem, but what’s the “right” solution? Several business models have come out, and success can be found in each of them, but they all have their faults still.
The Self-Service Model
The self-service model is great for minimizing the resources committed by the business, and allows the customer to make the purchasing decision and flow through their own client life cycle with minimal investment by the business. Not needing a dedicated sales team allows the business to keep overhead cheap and increase margins. However, this model leaves the customer completely vulnerable, and requires an excessive amount of effort into crafting the customer’s experience without being able to control their engagement with the product. Customers who aren’t passionate about the product, or who don’t have a good experience, will churn and can normally do so with minimal effort (making the decision too easy). I think the worst aspect of the self-service model is that business loses empathy for its customer. Instead of interacting with a prospective customer to present the value proposition, the business is putting their product out on a pedestal and saying, “if you’re interested, feel free to come get it.”
With SaaS software especially, there is very little risk on the customer’s part due to the common factor of free trial programs for those applications. Customers sign up with little consequence, and either churn at the point that payment becomes required, or maintain a free-user status if allowed. I can’t tell you how many SaaS apps I’ve signed up for that I stopped using within 72 hours of signing up, but probably still have an active account because the product never required me to convert to a paid-user. This is where I feel the self-service model misses out with having a sales team that is actively converting these users into customers. Also, the self-service model requires a decent investment into marketing, web presence / SEO, etc., in place of a sales team that would be advocating for the product directly to a consumer. This can be costly if not done well.
The one big benefit that the self-service model has is that it generally can clearly define its product. The business has to clearly present its product, its features, and its scope, to prospective customers. While it may keep some cards in the deck until after the prospect has signed up, it generally has to lay most of its cards on the table as a way to draw in new users. Therefore, new customers generally understand exactly what the product offers, and what they would be using it for from the get go. There is no confusion or miscommunication during “pre-sales” that would fail to set proper expectations for a product. Yet, again, this model has a higher risk of losing customers who sign up without understanding the product and realize ex post facto that it doesn’t meet their needs.
The Product-Centric Model
My thought for the best model focuses all components around the product first. This model is a combination approach that takes the “pros” from the two models we’ve discussed previously. Similar to self-service, the business’ first focus is to create a product, define it, and present it to the market. This allows the business to define the product, as well as define who its ideal customer is. Then the business’ sales team can target that demographic of customers directly and be direct advocates for the product within the market. You get the benefit of having a direct relationship with your customers, while also having a clearly defined use and scope for the product.
Of course, I have a bias here because I am a product person — I inherently always put the product first! However, I’d argue this model works best because the ultimate goal is to grow — and retain — revenue and market share. Clearly defining the product allows the business to know exactly who its ideal customer will be. Targeting the ideal customer base will reduce attrition because the product defines what kind of user would benefit most from it. The product is accessible to the client in a self-service format, BUT a small sales team has the knowledge to guide prospective users in the purchasing process, as well as have the interactions that will ascertain their conversion. The service team fulfills its known functions, but will also have a clear understanding of the product’s scope, and can keep customers within those expectations. And, ultimately, the back-end of the business continues to focus on building and enhancing its product offerings knowing that the front-end is clearly guided by the product itself.
The right balance of investment and return for the business is present in this model. It’s lean enough for the educated prospect, but also offers human interaction for prospects needing more information. The necessary back-end exists to build, maintain, and enhance, the product offerings. The front-end is flexible enough to engage customers as needed, without the customer being entirely reliant on the business. In turn, the business does not over-value its customers. It meets its customers needs, while also setting an expectation for what will be delivered within the product. There is no need to constantly bend to an overly-demanding customer, because the model should be able to protect a majority of the business’ revenue, even if a customer does churn. Also, an at-risk customer does not block the rest of the business from functioning.
Again, most of what I’m presenting is theoretical. The closest real world example I can point to is Apple. Apple builds the iPhone to an exact specification that does not allow customers to “customize” or push the product outside of its defined scope. In this, Apple has defined its customers as users who want a great UX at the expense of the freedom a customized UI would offer (i.e. Android phones). Also, customers have the flexibility to acquire the product on their own, or with the help of a sales team (whether that be through Apple or a service provider). Both Apple’s Sales & Service teams are guided by the product, and are available to customers as needed, but are not required to be involved with a customer in order for them to use the product. However, Apple does not completely fit within this model, and this model may not be successful at the scale that a company like Apple operates at.
It’s easy to hypothesize and theorize, but until you can validate success with real-world examples, it doesn’t mean anything. So, I’m closing this with an invitation to poke holes in this model and debate the pros and cons. Where does this model fall short? What real-world examples exist — in both a successful and unsuccessful model.
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