As with many things these days, words or expressions get bandied about with little regard for what they really mean. For instance, when we ask people how they define ‘Prospecting’, the overwhelming response is ‘Cold Calling’. Prospecting is far more than cold calling: it can happen anywhere with new, existing or lapsed accounts – anywhere you are trying to uncover and develop new business opportunities. And with social networks abounding, very few people ever have to make a true cold call. See what I mean?
And so we enter the confusing world of whether a company is Customer Focused or Customer Centric. What do these terms mean anyway? Does it really matter which one we are?
Well, yes it does – quite significantly as it turns out.
What we at Barrett have observed is that few company executives appear to understand the difference between being customer-focused and customer-centric.
Customer-focused organisations generally structure sales so that they can maximise their return. That is, they look at how they can get more business from their customers by delivering a level of service that is slightly better than their rivals, and sometimes – though not always – offering a lower price. This often means that salespeople are trained to uncover buyer needs and offer solutions that address those needs. In short, customer-focused organisations address customer needs only in so far as these are self-serving and address the organisation’s goals and imperatives.
Customer-centric organisations, on the other hand, explore ways to satisfy the needs of their customers at the same time as delivering greater value, making it easier and a more delightful experience for their customers to buy from them – considering incremental sales only as a result of the degree to which customers have been satisfied. Customer-centric organisations do this in the unequivocal belief that by demonstrating superior Customer-Centric behaviour, by investing heavily in making the customer’s experience unique and pleasurable, they will get increased support (and profits) from an expanding, loyal, customer base. This means they also invest in their people to enable and empower every member of the customer centric organisation to make decisions on the spot to address client’s issues, needs, etc. Their company stories are centred around the customers success and how their founders and employees helped their customers succeed. By placing their people at the centre of their business, customer centric organisations coach and support their people to be and do their best so the business and its customers thrive.
This all sounds lovely but is being Customer Centric better for business?
The following companies are example of those organisations that are doing very well – consistently – across a number of dimensions including: customer loyalty, revenue, profitability, staff retention, leadership, etc. by being Customer Centric
- Nordstroms (USA up market retailer much like David Jones in concept)
- SAS (Scandinavian Air Services)
- Ritz Carlton
With respect to Nordstroms, when asked at a recent investor meeting to quantify what the Customer-Centric approach had cost the organisation, the chairman’s response typified the philosophy and also demonstrates the difference between Customer-Focus and Customer-Centric behaviour. John Nordstom (the chairman) responded by telling investors that the cost to the company was far less than the profits it had made from customers returning time and time again to buy apparel at their premium priced stores.
Locally, companies like Bunnings are also moving in this direction by hiring knowledgeable staff i.e. retired tradies, husband and wife teams; people who have real experience in home maintenance, gardening, building, etc. who are empowered, proactive and interested in helping their customers. We had such an experience on the weekend with a Bunnings team member, who it turns out, makes guitars as well, who helped our son prepare to make a skate board using his knowledge of woodwork. The other staff we interacted with were equally happy and helpful. It was impressive.
Contrast this with Customer-Focused behaviour…
In November 2012 the respected consumer advocacy group Choice published a report on the levels of service and Customer-Centric behaviours amongst Australia’s leading retailers.
Furniture and white goods giant Harvey Norman was found to deliver the very worst levels of service. However, when approached for comment, chairman Gerry Harvey said the consumer group Choice got it wrong, had a private agenda and that Harvey Norman’s service was fantastic.
Harvey Norman is undoubtedly Customer-Focused. It tries hard to stock its stores with a range of products priced at an attractive level. It has staff roaming the floor who give the appearance of being interested in helping their customers. It spends huge sums on television advertising, trying to convince hard pressed customers to visit their stores for a great product, great prices and service. But someone has missed the plot. Either Choice has totally misread the realities or Harvey Norman has lost touch with its customers.
Is the Harvey Norman response, as opposed to the Nordstroms response typical of the difference between Customer-Focus and Customer-Centricity? Well, let’s look at the results:
- Harvey Norman’s results for 2012 were 39.2% down on the previous year
- Nordstrom’s results showed 13.5% improvement, 2012 over 2011
So you be the judge.
In short, Customer-focused companies do some things that superficially address customer expectations, driven by their desire for improved profit performance. Customer-centric organisations make meaningful changes in order to address their customer’s expectations, expecting and getting reciprocal support.
After all it was the late Peter Drucker – the great management guru of the 20th Century – who said: “The purpose of business is to satisfy its customers’ needs. The consequence of satisfying customers is improved, continuous profits…”
And you know it when you enter a customer centric organisation because everyone you speak to in the organisation is focused on you; they are interested in what you have to say and want to help you get what you need, they are genuine in their support and everyone seems to have the same set of principles and values they operate from – there is consistency across the board.
Outcome: you are left feeling safe, valued and cared for. And usually you want to come back for more and perhaps even tell your family and friends about what a wonderful experience you had.
You can watch an entire presentation on Customer Centricity given by Peter Finkelstein at the recent Swinburne University Business Forum function:
Remember everybody lives by selling something.