Ten years ago when Professor Gulati began researching customer-focused companies, he started by looking at hundreds of companies lauded by the media for their focus on customers. That list dwindled to just 12 truly customercentric companies; many firms had employees who insisted that their companies were not customer centric. The 12 that remained were the only ones that Professor Gulati, after much investigation, thought deserved that characterization.
Evidence that these 12 were different in a value-creating way can be seen in their stocks’ dramatic outperformance from 1999 to 2009. Collectively, they returned 134% to shareholders versus the S&P 500’s negative 0.6%. Sales growth was 233% for the 12 versus 10% for the S&P 500.
Why do so many companies profess customer focus, recognizing its importance, and yet fail so miserably to achieve it? Isn’t that the stuff of Marketing 101?
The problem: Most companies don’t really know their customers or markets well enough to anticipate behavior.
Reasons they fail:
- Oversimplifying the process of knowing the customer. They think customer centricity is about CRM or customer service or listening to the customer or customer segmentation. Those tools are merely starting points, yielding relatively superficial insights that don’t approach an understanding of customers’ thought processes.
- Not realizing that customers’ attitudes toward products change constantly depending on the choices they have, the information they have, and their private price/value calculations. When sales volumes drop in response to such shifts, companies are often caught by surprise.
- Not realizing how fluid what customers value can be. In dynamic markets, the line is constantly shifting between product/service attributes that are purchase motivators and factors that are basic expectations that can be demotivators if absent, but whose presence doesn’t drive purchase decisions. Cell phone range was once a purchase motivator; now it’s an expectation.
- Fixating on their own products/services. Most companies pursue customer insights through the lens of their own offerings. They ask narrow, product-focused questions like, “Do you like my lettuce? Do you like the packaging?” More revelatory would be broader, open ended questions such as “How do you like to eat? What’s dinner time like in your household?” Only by understanding customers’ life struggles and challenges can companies connect the dots between what solutions customers need and company capabilities to provide them. Notably, it was not one of the big lettuce producers that launched the fastest-selling grocery product in the last five years: Chopped, washed, bagged salad (priced at five times the cost of the ingredients). A lettuce-focused line of questioning would never have led to the insights that harried parents want nutritious food that is fast from refrigerator to table, packaged to last, sized right for no leftovers, and stackable in the refrigerator, or that white-collar folks prefer not to get their hands dirty.
- Lacking humility and curiosity. Humility is necessary to admit that one lacks answers and curiosity is necessary to pursue broad, open-ended lines of questioning. There has to be genuine interest in customers as people to empathize with their struggles.
For marketing to realize its calling as owner of customer centricity, the role of marketing departments and the identity of marketers must be re-envisioned. Marketers need to become:
- Innovators — not just product/service innovators but value-creation innovators.
- Instigators — instigating new ideas and turning those ideas into action.
- Integrators — asking the right questions to produce actionable consumer insights, connecting the dots between customers’ problems and company capabilities, and bridging silos to make execution happen.
- Implementors — accountable for execution that produces value. GE has transformed its marketing function in these ways; CEO Jeff Immelt refers to marketing as a “line job.”
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*Article excerpted with permission from Harvard Business Review