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The Customer is Truly King – A Look at Why Customer Obsession Needs to be Your Organization’s New Business Imperative

In their classic book, “The Discipline of Market Leaders,” authors Michael Treacy and Fred Wiersema described three basic “value disciplines” that can create customer value and provide a competitive advantage: operational excellence, product leadership, and customer intimacy.  For a long time since the book’s publication in 1983, many companies successfully adopted a customer intimacy strategy by “continually shaping products and services tailored to specific customer needs.”

But in this Web/mobile/social-driven era of customer empowerment, a customer-focused approach alone is no longer adequate.   Those who don’t agree will find it increasingly harder to survive, never mind thrive.

In their February 1  article in the Financial Times, Kyle McNabb and Suresh Vittal observe that technology-fueled disruption has undermined prior approaches to customer focus:  “Old models of channel and product specific ‘command and control’ just don’t cut it. These anachronistic approaches, in which channel owners can’t see beyond the channel de jour and product owners build from the inside out, don’t set the organisation up for success in a customer-driven world. Customer obsessed marketers (must) rethink business structures, reward methods and organisational design.”

Due to this fundamental change in the balance of power which has shifted irretrievably to the customer, the authors propose that marketing should lead the company shift to becoming customer obsessed.   Marketing has traditionally led cross-functional strategies and tactics around the customer lifecycle, from contact to acquisition to cross-sell and retention.  But leading an organizational shift to customer obsession is a much bigger consideration than who leads the charge; it’s the new business imperative defining what all functions in a company should do about it, both from a philosophical and operational perspective.

Some companies understand the difference between these two perspectives and some don’t.  In his recent book “The Ultimate Question 2.0,” Fred Reichheld provides a wealth of examples of companies which confuse their profit obsession with customer obsession and don’t value the difference, and thus, become obsessed with profits, i.e., adopting “customer unfriendly” business practices to maximize profits (and produce what he calls “bad profits”) that over time can undermine customer loyalty.   By embracing both the philosophical approach (i.e. following the Golden Rule and treating customers how you’d like to be treated), and the operational perspective (i.e. continually adapting  business processes and practices to create and increase net promoters), companies such as American Express, Charles Schwab, Verizon and Farmers Insurance  have become truly customer obsessed and distanced themselves from the competition.  This chasm will only become larger over the next several years.

At the Forrester Customer Experience Forum last June, Jim Bush, EVP of World Service at American Express, delivered a keynote titled “A Relationship-driven Approach to Service” where he talked about how when he took over World Service he drove the company’s transformation of customer service into a customer-obsessed organization delivering extraordinary customer service, from a traditional call center previously focused on reducing average handling time and cutting costs.   To accomplish this goal, American Express adopted a holistic approach of “serving relationships, not transactions”.  There was both a philosophical shift to regarding customer service as a source of competitive advantage rather than being a cost center: “each moment of truth” or customer interaction became an opportunity to compete and improve service delivery.  Mr. Bush also flipped the traditional approach of 70% of a reps’ training on technical content to 70% dedicated to customer handling training, and the results have been extraordinary. Between 2006 and 2011, his group more than doubled their net promoter score, delivered a 20-25% increase in card member spend, lowered attrition by six-fold, and, despite not focusing on reducing expenses, decreased service costs by 10%.  Those achievements are even more impressive when you consider the size and scale of American Express – which boasted $25.6 Billion in revenue for FY 2010.

In his October 3, 2011 research note, “CMOs Must Lead The Customer-Obsessed Revolution,” Forrester analyst Chris Stutzman writes that in “the age of the customer, empowered customers are disrupting traditional sources of competitive advantage.”  In order to thrive in this new era, companies must abandon the outdated customer approach where “workgroups focus solely on their view of the customer to develop silo-based strategies” and replace with a customer obsessed approach where “the customer’s needs permeate the company’s culture and operations facilitating the sharing of customer insights across the enterprise to develop cross-discipline strategy.”  It’s clear that the most successful companies today, and in the future, will fully embrace the philosophy and practice of customer obsession. They are not satisfied by merely focusing on the customer, but relentlessly adapting their customer engagement strategies, investment priorities, business processes and policies to ensure that they create more net promoters and engender fewer detractors.   Before Web 2.0 and the power of social media and mobile channel proliferation, traditional customer focus approaches may have worked.  But today, any company that fails to adapt their business process to serve the customer specifically how they demand to be served will likely suffer the consequences.  The smart companies have figured this out and are busy creating competitive distance.

Meanwhile, those in denial of this new customer reality are falling behind faster than they can run the numbers. By the time they realize just how bad things are, their customers will have already defected in droves.


Read the original blog entry...

More Stories By Grant Johnson

A dynamic, senior-level technology executive with a proven track record building businesses on a global basis. As Chief Marketing Officer for Pegasystems in Cambridge, MA Johnson is responsible for worldwide marketing strategy and execution. He oversees corporate marketing, field marketing, industry marketing, product marketing, marketing programs, marketing communications, analyst and public relations, and global web strategy. Previously, Johnson was the Vice President of Marketing at Guidance Software (GUID) and Vice President of Marketing and served as an officer for FileNet Corp., a $400+ million enterprise software vendor acquired by IBM in 2006. Prior to that, he was Vice President of Marketing for FrontBridge, an email management vendor acquired by Microsoft. Johnson led the company’s re-naming and re-launch, built the marketing team and delivered integrated marketing programs to support significant and sustained revenue growth. He has also served as Director of Marketing for Symantec, with worldwide responsibility for the Norton brand, and as Senior Vice President of Marketing at Ethentica, an enterprise security vendor. Johnson received his bachelor of arts from the University of California, Santa Barbara and his master’s in business administration from Pepperdine University. He has also published several articles on best practices in high tech marketing and co-authored the book, PowerBranding™

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