Embarking on the Journey to Customer Centricity

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2 customer centricity Embarking on the Journey to Customer Centricity by Craig Bailey Craig Bailey (right) is founder and president of Customer Centricity, Inc., an organization that assists companies in becoming customer-centric. Visit Customer Centricity s Web site at www. customercentricity.biz for resources addressing common challenges and opportunities faced by firms aspiring to become customer-centric. Craig can be reached at or craig@customercentricity.biz. 98 AFSM International

3 More and more, companies are aspiring to become customer-centric. Are you prepared to walk the talk? If so, you will benefit from the following overview of a highly pragmatic approach to embarking on the journey to becoming customer-centric. Why Become Customer-Centric? In a word: differentiation. Becoming customer-centric positions you to stand head and shoulders above the crowd in the eyes of your customer and in terms of the results (profitability) that you achieve. For too long, companies have focused internally with efforts toward total revenue, product profitability, operational efficiency, and organizational structure, on product or service attributes (playing leapfrog with the competition), and on price (focusing on delivering the same or a better product or service at the same or a better price). Instead, companies must focus their efforts externally. The key question is: Where is the customer? Without customers, you have no business. It is a well-known fact that retaining existing customers can be far more advantageous than acquiring new customers. So why do so many companies invest such significant amounts in acquisition, but consider retention an expense or a periodic initiative? There are two primary reasons: There is a lack of clear ownership of the customer experience and success of the relationship. Reward systems are geared toward new business vs. a blended model including all customers. Enough is enough. Your customers know when they are being treated as a number, a win, or a one-time transaction. Customers also recognize those positive changes that are designed only for your internal efficiency. This is not how to gain customer loyalty. As soon as the same or a better product/service becomes available at the same or a better price, they will be gone. Becoming customer-centric requires that you demonstrate to your customers that they are important to your business and that your goal is not only to meet their expectations, but to exceed them both now and for the foreseeable future. In short, you must get into the hearts and minds of your customers. An added challenge for high-tech companies is focusing on the leading-edge technology and related features. As soon as the company and the product/service line achieve a measure of success, competition emerges. The competition will do one or both of the following: 1. Offer the same product/service with the same attributes at the same or a better price. 2. Offer the same product/service with more attributes at the same or a better price. Participating in this cycle turns your product or service into a commodity not a place where you want to be. A key to becoming customer-centric is determining what is required to keep your customers for the long term and implementing the strategies to do so. Without a customercentric strategy, it will be only a matter of time before customers defect. (See Figure 1.) What It Is and What It Isn t A key challenge to becoming customer-centric is overcoming two of the most common misconceptions about such an initiative. The first misconception is that becoming customercentric is a customer service issue. While customer service is an important aspect of the initiative, this is where many of the problems of not being customer-centric manifest themselves. September/October 2005 Sbusiness 99

4 becoming customer-centric In order to become customer-centric, you must address the root cause of such problems the overarching business strategy. The second misconception is that becoming customer-centric requires you to submit to every request and demand of the customer. This could not be further from the truth. Becoming customer-centric actually requires that you say no when it is appropriate to say no, offering alternative approaches to meet the customer s need. My definition of becoming customer-centric is, aligning the resources of your organization to respond to the ever-changing needs of customers effectively, while building mutually profitable relationships. It encompasses every aspect of your organization and must start at the top. Figure 1 Customer-Centric Imperatives There are many steps to becoming customer-centric, but there are three toplevel primary imperatives: 1. Know your customer. You can t always know each individual customer, but you can segment customers based on common characteristics. The key theme is that each customer has a specific set of needs. Each customer deserves an appropriate level of attention (e.g., responsiveness, phone time, face time), but not every customer deserves the same level of attention. Customer segmentation is the process of grouping customers in a way that allows you to meet the unique needs of each segment effectively and efficiently through tailored value propositions. This enables an organization to allocate limited resources where they can best be leveraged to maximize customer acquisition, retention, and profitability. Typical customer attributes involved in a segmentation model include: Size of customer (e.g., market Open-Ended Funnel Effect (Non-Customer-Centric Firms) capitalization). Type of business. Nature of products/services/solutions purchased. Revenue (how much they buy from you). Strategic significance (e.g., name recognition, potential for growth). Level of complexity (unique/ highly specialized requirements). Method of selling and/or delivery. In order to be effective, customer segmentation requires that the entire organization aligns all of its resources to the model. 2. Align your resources. What resources are we talking about? Becoming customer-centric includes the alignment of your people and your organization s structure, processes, technology, products, and services to the customer. Figure 2 provides a list of these resources, the key principles to adhere to, typical realities plaguing non-customer-centric companies, and 2005 Customer Centricity, Inc. All Rights Reserved. Customer Defection/Churn 100 AFSM International

5 Figure 2 Resource Principle Realities Plaguing Non-Customer- Centric Companies People and structure. Your people have the greatest influence on the customer experience. Empower them to delight the customer. Not adept at managing interpersonal relationships. Driven by script with no latitude to deviate on behalf of the customer. Reprimanded for deviating from process. Measured on individual and departmental productivity (e.g., new revenue, calls answered). Lack of ownership of the customer. Not my problem syndrome. Back-office personnel detached from the customer. Customer-Centric Requirements All personnel are skilled in managing interpersonal relationships. Perform against policies and procedures, understanding that they were designed to enable the customer to do business with you not meant to be a customer obstacle. When exceptions occur, the objective is to determine how to meet the customer s need and facilitate meeting that need without placing the burden on the customer to figure it out. Rewarded for customer-centric behavior. When deviation occurs outside of tolerance or a negative result occurs, coaching takes place to improve employees future decision making. Measured based on customer success (e.g., satisfaction, retention, revenue, profitability, share of wallet). Clear accountability and ownership of the customer. Adopting the philosophy: The customer s problem is my problem, and therefore, I will facilitate resolution. Back-office personnel clearly recognize how they impact the customer experience. Everyone is a customer to someone else. Process. Be easy to do business with. Processes designed from the inside out, focused on intra-departmental efficiencies. Processes designed from the outside in to enable customers to do business with you. Organization is difficult to do business with. Seams of the organization are exposed to the customer. Being easy to do business with. The customer is buffered from the intricacies of the organization. Lack of information. Customer is not allowed to look behind the curtain. Transparency/full disclosure provided to the customer. Customers managed on a transactional level (e.g., individual orders, inquiries, issues). Customer s entire experience is managed holistically. Technology. Automate effective customer-focused practices. Implemented in response to business problems, automating existing bad practices. Implemented with a focus on efficiency gains, resulting in obstacles for the customer. Implemented to automate improved operating models and processes. Implemented to enable customers to do business with you more effectively and efficiently. Products and services. Design the customer experience before market. Designed and launched based on features/ functions anticipated to capture new revenue from new customers. The customer experience is considered aftermarket in a reactive manner. Needs of existing customers and improving their experiences are the primary driving forces. When launching a product or service, the customer experience is designed in advance. September/October 2005 Sbusiness 101

6 becoming customer-centric key requirements to becoming customer-centric. Once an organization has aligned its resources to the customer via segments, the next step is to listen to and respond to the customer on an ongoing basis. 3. Listen and respond. Most organizations conduct some form of customer satisfaction survey. However, simply administering a survey alone is not listening. Listening requires that you not only internalize what is heard, but also respond. And listening goes far beyond a customer satisfaction survey. A common name for this listen-and-respond strategy is voice of the customer. A complete voice-of-the-customer strategy includes obtaining and analyzing customer input continually from every touchpoint that a customer can have with your organization. These touchpoints include: Sales/account management. Customer care/technical support. Field service. Credit and collections. Customer surveys and interviews. Customer focus groups, user groups, or board of advisors. Third-party vendors (service delivery partners). All forms of media, including Web site, phone, , fax, orders, complaints, and returns. Truly listening requires that you obtain input from each customer touchpoint, integrate this information, internalize it, analyze it, and respond. (See Figure 3.) Responding to customer input requires that you take the results of the prior steps (obtaining and analyzing customer input) and: Socialize internally to ensure cross-functional awareness of customer sentiment and needs. Perform response planning, which includes defining customer segments and account-specific strategies to improve the customer experience and clear ownership for delivering on necessary improvements. Establish organizational goals and objectives for improving customer success factors (e.g., customer satisfaction, retention, revenue, profitability, share of wallet). Update the customer base with the following information: this is what we heard, this is what we have done, and this is what we have planned. (See Figure 4.) Taking Your Business to the Next Level Consider the following business scenario. Several members of your organization are meeting with a very demanding account. The key decision Figure 3 Continuously Obtain and Analyze Customer Input The Client: Administrators, Coordinators, Technical Contacts, Managers & Executives Phone, , Letters, Fax, WWW Surveys Service Centers Sales/ Account Management Vendors & Suppliers CRM DB 2005 Customer Centricity, Inc. All Rights Reserved. Think Tank Client Board of Advisors Interviews 102 AFSM International

7 Figure 4 Leverage Customer Input and Respond Socialize Internally (Learns) Engage the Minds of Others Think Tank Response Planning This Is What We Heard This Is What We ve Done This Is What We ve Planned Via: WWW Newsletters Publications Events Account Meetings Etc. Communicate to the Client Organizational Goals, Objectives & Prioritized Initiatives Aligned Resources 2005 Customer Centricity, Inc. All Rights Reserved. maker for your customer the CIO is in attendance. The CIO s team shares some fairly complex requirements to taking the relationship to the next level. The CIO states, If we are asking you to do anything that would make our relationship unprofitable for you, please let us know. We are invested in your success. So the key is to make sure we clearly articulate our needs, enabling you to respond with a solution that you can deliver effectively. This is an account of a real event a great win-win relationship! Wouldn t you like to achieve this successful business relationship with the majority of your customer base? The result of aligning your resources to respond to the ever-changing needs of customers will be the building of mutually profitable relationships. Focus on the customer, and your bottom line will improve naturally. Focusing on your products and operational efficiencies could alienate customers and cause your company s products and services to remain commodities where price is the key differentiating factor. If you are considering embarking on the journey to becoming customercentric, a logical first step is to have a baseline performed in order to determine where you are today on the path of customer centricity. Upon doing so, a roadmap can be defined to pragmatically close the gap between where you are and where you want to be. Unique opportunity for our Asia Pacific readers. Craig Bailey is scheduled to present a seminar in Kuala Lumpur, Malaysia, on October, The seminar will cover strategies for creating customer-centric organizations as well as tactical approaches to enable customer service representatives to deliver top-notch service. To learn more visit This article originally appeared in the September/October 2005 issue of Sbusiness, a publication of AFSM International, Fort Myers, Florida. September/October 2005 Sbusiness 103