Category Archives: customer focus

Customer centric leadership – how to paint a vision that inspires action

Posted on September 19, 2012 by | Leave a comment

interbike customer centric leadership

I have been fortunate enough to indulge one of my passions this week, attending the world’s largest bicycle industry show in Las Vegas, Interbike 2012.

This morning for the first time in 32 years they held an industry briefing that was keynoted by John Burke, the president of Trek Bicycle Corp. Trek is an industry leader with more than $800 million in sales and more than 1800 employees. The firm was founded by John’s father, Richard, more than 30 years ago.

However the keynote had nothing to do with Trek, in fact the company’s name was not mentioned once. Rather it was a rallying cry designed to inspire an industry to action.

John began with the good news, the industry is growing with revenues of more than $4.5 billion in 2012. More people are riding bikes more often and the infrastructure around cities in the US has undergone major investments and upgrades over the past decade. But at the same time government funding for new investments in infrastructure have been cut and only 1% of the US population use bikes as a form of transport compared to the world’s leader, Holland with 26%.

John focused on the barriers facing customers to increased participation in what is an activity that addresses the major issues of the day – health and the environment. Specifically it is an infrastructure and safety issue. Most people do not want to share the roads with SUVs, trucks and cars they want safe bike paths that actually take them somewhere they want to go.

John specifically called out the low levels of participation by industry members in advocacy activities design to influence public policy and perceptions and source funding for new projects. Less than 20% of manufacturers, dealers and employees are members of the main bicycling advocacy group Bikes Belong.

Lance Armstrong and John Burke

John Burke with Lance Armstrong a strong Trek Supporter and Sponsored Rider

Today’s keynote was a call to action for the industry to work together to grow the market. With some simple math John showed the impact of small increases in cycling engagement. If the industry could grow participation to 2% it would be a $7.5 billion industry by 2025.

The big hairy audacious goal (BHAG) however was to grow participation to 5% of the US population (remember Holland is 26% and many european countries above 10%) this would result in a $12 billion + industry size by 2025!

At the conclusion of his talk John mentioned there were 4749 days until the year 2025. He brought out two large jars one full of beans and the other empty. From day onwards he would move one bean from one jar to the other everyday to remind himself to be doing something towards fulfilling this industry goal and encouraged everyone in the room to do the same.

He received a passion filled standing ovation. Now that is Customer centric leadership at the industry level!

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Posted in C-Level Quotes on MarketCulture, Customer Centric Leadership, customer focus, Peripheral Vision

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Why Tesco’s Fresh and Easy concept is struggling in America

Posted on September 18, 2012 by | Leave a comment

fresh and easy miss understands the american consumer

The world’s 3rd largest retailer, UK based Tesco, has been closing some of its “Fresh and Easy” stores in California this year. The Fresh and Easy chain was launched in 2007 with the goal to provide consumers with smaller neighborhood style stores with a variety of fresh organic and reaonably priced prepared meals.

So far Tesco have invested $2billion and opened more than 150 stores in California and are yet to break even.

No doubt Fresh & Easy has run into market obstacles, including California’s weak recovery from the recession but more importantly some of its merchandising practices (commonplace in Britain) have dumbfounded many American consumers.

For example, Fresh & Easy initially wrapped much of its produce in cellophane to preserve freshness. But skeptical U.S. shoppers — accustomed to examining their broccoli and lettuce up close — mistook the wrapping as a way to hide inferior products. American consumers assume produce in plastic bags is not as high quality as those in bulk. This led to an initial lower quality perception that has been hard to shake.

Adding to Tesco’s worries is the fact that many American consumers are conditioned to the idea that”big is better”. While smaller stores maybe more personal and convenient, Americans are used to driving distances to large retail warehouses (think Costco, Walmart etc) and often value bulk buying and competitive pricing over convenience.

There is also strong competition from revamped Safeway stores and the continued excellence displayed by Trader Joes and Wholefoods that really understand their customer base.

So where does this leave Fresh and Easy? They still have time to reposition themselves and find their place in the market but Tesco’s shareholders are getting impatience so they will need to find out what American consumers value most about their store’s value proposition and turn up the volume!

Similarly to Home Depot in an earlier post, Tesco should have started smaller and not ramped up until they knew they were hitting their sweet spot.

A culture that is customer centric, starts with the customer, understands what frustrates them about the current market offerings, builds a solution, tests it, then scales it.

Can Fresh and Easy survive?

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Posted in Competitor Insight, Customer Centric Culture, customer focus, Customer Insight, Customer Value, Customer-Centricity, Market Culture Inaction, Peripheral Vision

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Why Home Depot failed in China

Posted on September 17, 2012 by | 1 comment

home depot lacked customer insight in China

Just because a business works well in the US provides no guarantees of success in international markets. How could a company as successful as Home Depot not be able to make a success of it in China? (the WSJ reported it just decided to close its remaining 7 stores)

The key reason is a failure to really understand the chinese customer landscape. Home depot works in the US because labor rates are relatively high and there is a strong do-it-yourself culture that leads people to take on even major renovations without professional help.

Not so in China, with a large pool of low cost labor and a frenetic work ethic most chinese would prefer to pay someone to get the work done. The neither have the time or desire to “do-it-themselves”. When you add these economics to the picture it clear the model would not work, at least for now.

An interesting contrast it provided by IKEA which has been growing successfully in China. It also has a do-it-yourself model but there appear to be two differences:

Firstly it offers customers a low cost assembly service, those customers that want the lowest possible price can do it themselves, for a little more IKEA can arrange assembly.

Secondly, according to Forbes contributor Helen H. Wang (an expert on China’s middle class) Ikea provides the new chinese home owner an education in how to furnish their home in a western style. Given the growth in new home ownership in the last 15 years there a many new consumers looking for stylish, low cost ways to furnish their new homes.

The nuances of different markets are difficult to pick up, unfortunately for Home Depot there appears to have been a major customer preferences trend against them. How could they have avoided this costly error?

If they had a customer focused culture their first approach would have been to understand the chinese consumer in a little more detail. This may have uncovered what in hindsight seems obvious and saved them significant time and investment.

Often deep customer understanding can only come from launching and operating in a market. In this case I believe they could have done a better job by testing a SINGLE store more thoroughly rather than expanding too quickly. They could have started small and built out their strategy and store expansion plan on a much stronger foundation – one that customers wanted.

If your interested in developing your skills so you don’t make the same mistakes Home Depot has we have two free online courses here that may be helpful:

Course: el001- Understanding Value

Course: el002 – Uncovering Customer Needs

What do you think? Could Home Depot have done more to have averted this costly mistake?

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Posted in Customer Centric Culture, customer focus, Customer Insight, Customer Value, Market Culture Inaction

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“Culture is not the most important thing, it’s the only thing” – Costco’s Jim Sinegal

Posted on September 14, 2012 by | 3 comments

The Costco Experience

Customers walk in to buy six months worth of toilet paper and walk out with the latest flat screen TV and a case of French Champagne.

Where else would this type of consumer behavior be possible but at Costco, the US’s most successful warehouse club/retailer.

Costco has an interesting mix of customers, it tends to attract more affluent customers in as great a volume as lower income customers. It is very selective about the products it chooses and is always varying the merchandise on offer.

Customers tend to shop their regularly and come back for that intangible feeling that is created by the store’s atmosphere. It is always busy, goods are stacked in large warehouse style pallets, there is a “racetrack” style circuit that shoppers are guided through which means that get to see virtually everything on offer each visit.

Why is Costco successful?

One of the key reasons is Costco’s ability  to allay all the fears consumers have when making purchase decisions:

1. Will I get the right product for my needs?

2. Will I get the best price available?

3. Will the product be high quality

Costco takes the risk out of purchasing by having one of the most generous product return policies on the planet, I recall seeing a women return a vacuum cleaner that was at least 5 years old and considerably used. She was refunded – no questions asked.

Costco’s pricing is always tracking pricing of their competition both online and offline and driving hard bargains with suppliers to make sure they are super competitive. They mark up their products by 15% so if they buy at the right price that sales price will always be very competitive.

Costco carries well know often premium brands (they even sold Apple products for a time), their own Kirkland brand has built a reputation as a high quality store brand that reinforces Costco’s value leadership position (great quality/great price)

This strategy puts customers at ease, confident they will be getting great value on high quality products.

Another part of the strategy is to sell in bulk which means consumers buy more than they usually would of particular products. When consumers see the pricing they can get per unit on bulk purchases they can’t resist.

A powerful customer focused culture.

Jim Sinegal, Costco’s former CEO, in a recent CNBC documentary on the “Costco Craze” described the secret of Costco’s success was its culture. Jim has created a culture where there are no divisions between leadership and staff, everyone is on the same page when it comes to understanding Costco’s customers and what makes their model work. Every employee knows their role in creating the right environment for customer’s to have the “Costco experience”. Employees are paid fair wages (higher than competitors) that reflect their importance in contributing to the customer experience.

As CEO he is constantly on the move visiting Costco’s 580 stores across 9 countries every year, getting direct feedback from customers and his employees as to what’s working and what is not. Remember this is a $89 billion business.

How many CEOs set that tone for their organizations?

See more on the CNBC documentary below:

Inside the Box: What’s the secret to Costco’s success?

AND if you want to build this capability in your organization check out our MarketCulture Academy.

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Posted in Competitor Insight, Customer Centric Culture, Customer Centric Leadership, customer focus, Customer Insight, Customer Value, Customer-Centricity, Employee Engagement, Market Driven, Strategic Alignment

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Customer Metrics: Measure what matters most to customers

Posted on September 13, 2012 by | 10 comments

Key Customer Metrics

As business leaders we tend to pay a lot of attention to the metrics important to the business, that is, revenue, cash flow, profitability, growth and so on… but the real drivers of these business outcomes are customers.

So the obvious question becomes what customer metrics should I be tracking to make sure my business metrics continue to head in the right direction?

Well there are a number of key customer metrics that must be considered for every business:

1. Customer Satisfaction

As a first step it is important to track customer satisfaction, this will provide some inputs as to how well the business is performing on delivering what it promises. But remember customers have already paid for satisfaction, they expect to get what they paid for. So high levels of dissatisfaction are an obvious and immediate cause for concern.

Satisfaction is not enough, even highly satisfied customers can and do switch to alternatives so it is important to also look at Loyalty and Advocacy. That brings me to the next question (Fred Reinhold calls the “Ultimate Question“) How likely are you to recommend us? Loyal customers not only bring you repeat business, they also expand your customer base through positive word-of-mouth.

2.Net Promoter Score

The net promoter score is a simple tool designed to identify 3 types of customers, promoters (advocates with strong positive word of mouth),  detractors (negative word of mouth) and those in the middle. The goal is to drive up the number of promoters as a way of driving business growth.

Many of the most customer-focused businesses in the world use NPS, see below a list of the current top 10 Netpromoter scores in the US:

USAA – Banking = 87%
Trader Joe’s = 82%
Wegman’s = 78%
USAA – Homeowners Insurance = 78%
Costco = 77%
USAA – Auto Insurance = 73%
Apple = 72%
Publix = 72%
Amazon.com = 70%
Kohl’s = 70%

Source: Satmatrix

3. Customer Value Analysis

This is a more advanced metric specifically looking at the value a customer places on what you offer. Value consists of an equation that includes CUSTOMER PERCEPTIONS  of price,  service and product quality. Customer value analysis looks directly at how customers view your business vs. your competition and provides you with valuable information on what you might need to adjust in terms of both product and service quality, as well as price, to increase market share and revenue.

4. Life Time Value of Customers

I talk about this in some more detail in these two posts:

Part 1: Understanding Lifetime Value of Customers

Part 2: Calculating Lifetime Value of Customers – a simple example

Something not covered however was some of the inputs to Customer Lifetime Value which in themselves are useful metrics:

Customer Acquisition metrics include customer awareness levels, the information sources customer use to make purchase decisions, and cost of acquiring a customer.

Churn (%)  measures how many customers are leaving, that is, customer attrition.  Churn is a commonly used metric related to customer retention. Specifically, this is about knowing how many customers are defecting and why.

Customer Complaints are usually an early warning signal that something is wrong. Most customers will not complain they will just take their business elsewhere. Complaints although often difficult to hear are a gift that can help course correct.

5. Your own Customer Culture

How customer obsessed is your organization? How would you know?

This is the question we received from a CEO of a Global 1000 company a number of years ago. It led us to the development of the Market Responsiveness Index (MRI) to answer that very question.

This is an organization-wide metric design to measure the behavior of employees and the level of attention they pay to customers in their daily work.

It is a one of a kind tool that allows you to benchmark your company versus the best in the world, you can check it out here.

What Criteria should I use when deciding on Customer Metrics?

  1. The metric drives business results
  2. The metric correlates strongly with business results
  3. The metric is something you can influence
  4. The metric can be measured accurately
  5. The metric can be measured consistently
  6. The metric can be measured cost effectively
  7. All the stakeholders agree the metrics meet these criteria

Ultimately you want to choose the right metrics for your specific business, they should be tailored to the unique business drivers and business strategy.

Why implement customer metrics?

Tracking customer metrics is important for many reasons, but the most important reason is cultural. It gets everyone on the same page, aligns people across the different parts of the business, and leads to a customer-focused culture of success. You should celebrate wins when a key customer metric reaches a new and important milestone. Choosing the right metrics and celebrating progress against them are incredibly important to building a strong customer culture that can work together and grow rapidly.

What customer metrics are you using?

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Posted in Collaboration, Cross-functional Collaboration, Customer Advocacy, Customer Centric Culture, Customer Experience, customer focus, Customer Metrics, Customer Satisfaction, Customer Value, Customer-Centricity, Life Time Value, Market Driven, Silos, Voice of the Customer

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What is the purpose of business?

Posted on September 10, 2012 by | Leave a comment

What's the purpose of business?

Ask anyone this question and you will get a variety of answers, the most common being to make a profit. While certainly to make a profit is a requirement I don’t believe it is a business’s reason for being.

Most businesses start out with a problem that needs solving. This problem is one usually experienced by many others. The business develops services and products to solve this problem better than any alternative and WHAMO it has something that people will pay for!

Unfortunately what happens over time is the focus of the business becomes the profit it generates rather than the problems it solves for customers. This often results in short term profit maximization at the expense of customers rather than for their benefit.

The outcome of this short term profit focus often results in toxic cultures where internal groups work against one another rather than for the benefit of the entire organization. The original purpose of the business is lost and employees become disconnected.

By realigning the business with its customers and rallying around a single focus, maximizing outcomes for customers, businesses can find their way again and produce even larger profits.

Remember profit is the RESULT of creating the best possible outcomes for your customers not the other way around.

If you want to create this type of culture in your company, take the Market Responsiveness Index and find out where you stand today.

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Posted in Customer Centric Culture, customer focus, Customer Value, Customer-Centricity, Employee Engagement, Outside In, Strategic Alignment

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Does Facebook have a customer culture? Absolutely!

Posted on September 6, 2012 by | Leave a comment

Facebook's Customer Focused CEO

With Facebook in the business news for all the wrong reasons, a cratering share price, slowing user growth and so on it is useful to think about exactly what type of culture Mark Zuckerberg has created.

In a recent letter to shareholders he made his position clear:

“Facebook was not originally created to be a company. It was built to accomplish a social mission — to make the world more open and connected.”

This is an inspiring larger than life vision, its not about making money, its about something that will motivate employees everyday they come to work.

Most great people care primarily about building and being a part of great things, but they also want to make money. Through the process of building a team — and also building a developer community, advertising market and investor base — I’ve developed a deep appreciation for how building a strong company with a strong economic engine and strong growth can be the best way to align many people to solve important problems.

Simply put: we don’t build services to make money; we make money to build better services. And we think this is a good way to build something.

This last sentence is particularly telling for me. This is the essence of a customer culture. It starts with creating value, creating services that solve problems for people. If you can do this well then money should follow as a result of creating value people will pay for.

By focusing on our mission and building great services, we believe we will create the most value for our shareholders and partners over the long term — and this in turn will enable us to keep attracting the best people and building more great services.

Here is the long term perspective I mentioned in my previous post. By not taking short cuts to boost short term profitability Facebook can take a balanced approach to investing in people, customers and provide returns for investors over time.

Although Facebook are currently not in our Market Responsiveness Index (MRI) database, I would expect them to be strong in all 7 of the customer culture disciplines we measure.

Its current challenges are the short term pain associated with becoming a public company. If it remains focused on creating maximum value for customers it will continue to be relevant and profitably long into the future.

For a great analysis of the full letter read Henry Blodget‘s article here

What’s your take on the Facebook culture?

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Posted in C-Level Quotes on MarketCulture, Customer Centric Culture, Customer Centric Leadership, customer focus, Customer Insight, Customer Value, Customer-Centricity, Strategic Alignment

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Taking the long view

Posted on September 5, 2012 by | 1 comment

The Long View, Davenport

A customer culture is one that takes the long view.

It’s a company that recognizes the necessity to get short-term results but does not borrow from the future to achieve them.

It’s a company that will invest in customers today so that they will remain customers tomorrow.

It’s a company that values long term healthy relationships with employees, partners and customers.

It’s a company that will do the right thing in the short-term even though it will cause pain so it will become the right kind of company in the future.

Does your company take the long term view?

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Posted in Customer Centric Culture, Customer Centric Leadership, customer focus, leadership

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Can technology retailers survive? Not without a customer focused culture and some new ideas.

Posted on September 3, 2012 by | 1 comment

Retail Survival? The Amazon online model continues to apply pressure to the traditional bricks and mortar retail stores. Now with the addition of an app that allows shoppers to check prices on the amazon site while in Best Buy or similar technology retailers they continue to squeeze retailer margins. At the other end is Apple that has invested heavily in expanding its retail presence. Add to this a the multitude of small online technology retailers and the rate of change in technology retailing is going through the roof. So what should the traditional technology retailers do?

Their strength is the in store retail experience, many products consumers still prefer to see in person. Best Buy does a great job of merchandising and displaying the latest in technology. The key is how do they close business in store? Creating a customer focused culture that recognizes the options available to consumers and works to innovate on ways to still win by providing the right value at the right time is a key part of the answer.

For example many consumers still prefer to purchase in store but perceive they might pay too much. Other consumers are price shoppers they are just looking and plan to buy online. It is these two groups of customers where there are opportunities to provide different value. For the first group providing expert advise and education during the sales process is valuable even to those will high levels of technology knowledge. Some customers are prepared to pay a small premium for this type of value added interaction.

For the second group of price shoppers, the task is more challenging and many of these customers will want to purchase online. Why not try differential pricing, here is your price in-store (with the margin necessary to sustain the costs of running the store), versus your online store price (lower factoring in the lower cost model). This recognizes that providing an in store retail experience is expensive and only those consumers that really value this should get that experience. Online shoppers would get pricing that is better than Amazon’s in recognition that the customer made the effort to come into the retailer’s store.

Is anyone doing this? Could this work? I don’t know but it would be an interesting idea to test.

I am not saying this is easy, it’s not easy, but the retailers must change and adapt to the new realities and develop alternative value propositions if they are to be as relevant in the future. They must leverage the knowledge and experience of all of their employees to solve these competitive challenges.

“A market culture is what great companies develop to deal with exactly these types of business challenges”

What innovative new techniques have you seen from the traditional retailers? What else can they be doing to compete?

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Posted in Customer Centric Culture, Customer Experience, customer focus, Customer Value

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Apple’s secret manual for customer experience

Posted on August 31, 2012 by | Leave a comment

apple_customer_service_secrets

Much of Apple’s success has been attributed to its innovative, high quality products which no doubt have been a crucial ingredient to it becoming the world’s most valuable company this past week.

Something that is not talked about a lot is its fastidious attention to every detail of the customer’s experience. A long time Apple manager was explaining to me recently how attention was paid even to the feeling the customer receives when opening the iPhone box! Apple wants the customer to feel they are opening a product that is special, different and high quality and the suction on the box reflects that feeling in a visceral way.

That brings me to the in store experience, recently Apple’s secret employee manual was leaked. It laid out in immense detail how employees should interact with customers. From what I have read (and experienced in store) it is spot on.

It strikes the right balance between customer empathy and Apple cheerleading.

Some commentators believe this is manipulative and other cynics believe it is an unachievable standard to reach in the real world.

The reality is the Apple in store experience is one of the best on the planet and its customer satisfaction scores reflect this fact. Now Apple is clearly not perfect and they mess up like everyone does but they are very good at getting back on track quickly and moving forward.

Here is a great example from the manual under the subheading “Empathy Exercise 2 – Techniques” lays out a simple customer scenario:

“Customer: This Mac is just too expensive.
Genius: I can see how you’d feel this way. I felt the price was a little high, but I found it’s a real value because of all the built-in software and capabilities.”

In this example employees are taught to deflect objections on Apple’s premium pricing by reinforcing the value the customer gets from the product. This approach links well with the section of the manual on things to avoid doing. For instance: “Do not apologise for the business [or] the technology.” Instead, empathize: “I’m sorry you’re feeling frustrated”

Great in store retail experiences don’t just happen they require you to hire the right people and provide them with the right training to execute the difficult dance between doing what’s right for the customer and what’s right for the business at all times.

What do you think, is Apple out of line or being unrealistic?

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Posted in Customer Centric Culture, Customer Experience, customer focus, Customer Service, Customer-Centricity

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