Thoughts on Profitable Customer Centricity
Satisfied customers are integral to our success, and all our customers need to be treated with respect, but the truth is not all customers are equal.
The customer is always right. Right?
Major corporations seem to be queuing up to boast about their “customer-centric strategies”. Statements like “the customer must be at the centre of everything we do” and “the customer is always right” have become mantras in modern management speak.
You could be excused for thinking the only path to success involves keeping 100% of customers 100% happy, 100% of the time. To suggest otherwise seems almost heretical.
Meanwhile, closer to home...
Australians have been transfixed in recent months by a succession of jaw-dropping revelations at our Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. If you've been out of the loop you can catch up on some of the "greatest hits" here.
It’s become manifestly clear that many of our best-known financial institutions have viewed customer-centricity as the exclusive domain of PR spin merchants and marketers. Judging by the behaviour exposed, customers at the metaphorical coalface are simply a resource to be plundered.
To quote from the commission’s just-released interim report:
“Why did it happen? Too often, the answer seems to be greed – the pursuit of short-term profit at the expense of basic standards of honesty.”
“How else,” continued the Commissioner, “is charging continuing advice fees to the dead to be explained?”
Clearly, there needs to be a middle ground
One where we pay more than lip service to customer service.
One where we recognize that satisfied customers are integral to our sustainable success, and we underpin our actions with ethics, while also accepting that not all customers are equal and the practices we put in place to please them generate costs as well as benefits.
Profitable Customer Centricity
With the above thoughts in mind, I was interested to watch a recent webinar called "How to Achieve Profitable Customer Centricity" by Graeme Boorer, principal and managing partner of Customer Strategies International Pty Ltd, and founder of QCX.INSTITUTE. Graeme provides lots of detail around designing a customer-centricity strategy, but these were some of my key take outs:
- Where's the ROI? You need to take a hard-nosed, return-on-investment based approach.
- Narrow your focus. Invest in your high value customers, or those with the greatest potential to increase their value.
- Customers aren't equal. Accept that many of your customers contribute little to your bottom line, and are unlikely to ever love you. For these, focusing on reducing cost-to-serve is a valid aspect of customer-centricity.
- It’s an iterative process. Don’t over-analyse or be fixated on perfection. Look for low hanging fruit and get some quick wins on the board.
- Measure it. Let early successes fund future initiatives. It’s easy to measure the costs of initiatives. Measuring the benefits is harder, but critical, if we are to justify ongoing investment.
With the horror stories from our Royal Commission still fresh in our minds, it’s worth emphasising that our right to be known as a truly customer-centric business will flow from how we treat each of our customers, not just our most profitable ones.
Being rational and ethical are not mutually exclusive. It is quite possible to serve low-value customers respectfully and professionally without over-servicing them.
By way of example, Graeme wrapped up his webinar with a couple of interesting case studies:
- By understanding the characteristics and motivations of different customer segments these businesses were able to modify their product offerings and service terms in ways that reduced their operational costs, while also making them less attractive to certain segments.
- While they continued to treat all customers equally, over time many of their unprofitable customers organically moved to competitors, substantially increasing the average value of those who remained.
Do you understand your customers?
Profitable customer-centricity requires a deep understanding of your customer base.
No doubt you have lots of data about your customers, but how do you turn data into insight? A starting point might be a Business Intelligence tool, such as Info-Explorer from Orchid Systems.
About the Author:
David Lacey is Communications Manager at Orchid Systems. You can find out more about David and other Orchid staff members at the bottom of our About Us page.