Customer Centricity – A management model for organizations

In times of oversupply and high customer demands, start-ups and digital companies are increasingly threatening legacy companies. Their key to success: a more radical focus on humans and the aim to forge lasting relationships with customers. Customer Centricity is – metaphorically speaking – the backend that makes good offerings and a great customer experience possible on the frontend in the first place. This backend is the way businesses work and think, and Customer Centricity is its operating system. It affects all parts and functions of the organization, because almost every employee is involved in shaping the customer relationship – immediately or indirectly. Additionally, Customer Centricity provides direction for Digital Transformation and can be a motivating higher purpose for employees.

The choosy customer

Does this sound familiar? Your video streaming provider keeps forgetting which episode you saw last. Then you get to know another provider who knows precisely where you left off last time, and you can skip the often seen opening credits. Changing providers then is only a matter of minutes, and soon a new provider will be happy about your regular payments.

Only the customer and his loyalty ensure the survival of a company, he is the central sponsor. Putting him at the center of attention ensures economic survival. This insight is not new, but the path is. Today it is more holistic, more comprehensive and more radical than ever before. US companies that are close to Silicon Valley have recognized this in particular. For some time now, methods such as Design Thinking, Lean Start-up, and Service Design have been successfully applied there. What they all have in common is a comprehensive orientation toward the customer: Starting with an in-depth understanding of articulated and unarticulated needs, they align products, working methods, and culture in a holistic and cross-functional way. Ultimately, it is a question of not only winning over customers but also retaining them long term by creating value for them. 

Companies in Germany, Austria, and Switzerland are beginning to follow this path. This is confirmed by a study of eleven large companies conducted by the consulting firm Rlevance, Berlin, and Sarah Seyr, (Swisscom’s Customer Experience expert at that time). Leaders who are driving this change were interviewed, e.g. the Chief Customer Officer of Allianz, the Head of Human Centered Design at Swisscom or comparable positions at Lufthansa, E.ON or Deutsche Telekom. 

A more radical focus on the customer is necessary because today more than ever these customers have the choice. If a competitor offers a more useful product, a more appropriate business model or a more enjoyable Customer Experience, customers are quickly switching to it – after all, alternatives are often just a click away. Permanent clientele is awarded to those companies that better address people’s wishes and needs and consistently fulfill them throughout the entire Customer Journey. A loss of significance threatens established brands in particular if a newcomer offers such a solution that is more valuable for customers.

In German-speaking countries, however, customer-centric corporate management is still in its early stages. In many places, marketing still focuses too much on the pre-purchase phase and does not pay enough attention to product usage. This means they are missing the central point: creating value for users. Digital technology offers infinite new possibilities in this respect. However, in the country of engineers, we focus too much on technology in the digital transformation. Companies from Silicon Valley, on the other hand, implement services, features or experiences in addition to digital products, in which technology plays only a minor role because they know that this is the only way for companies to become fit for the new age of choosy customers.

Customer Centricity vs. Customer Orientation
Difference between Customer Orientation and Customer Centricity - the latter goes much deeper into the organization.

The hunt for customers and its consequences

Classic recipes for sales-oriented customer acquisition and retention are becoming less and less effective today. As people gained more media literacy in recent times, the difference between image and reality become more apparent. The burger on the tray looks different than on the photo, and the new “healthy green tea with Matcha” contains only one percent green tea and 35 percent sugar, according to the small print.

In addition, marketing communication today is like a drive hunt: The very same pleas are brought out with high media pressure to every-new channels. And companies are moving in on their customers: Followed with Re-Targeting, deceived with Programmatic Advertising and lulled with Influencer Marketing. Looking from the customer’s point of view across all product categories, one discovers a cacophony of marketing noise that people are increasingly evading. All this hurts the credibility and impact of marketing.

Long-term relations as a new goal

Customer Centricity is very close to marketing, which is also about winning and retaining customers. The goal of Customer Centricity, however, is to create added value and relevance for people. It increases the willingness of recommendation, but above all, it is binding customers for the next purchase. Retention, in turn, means lower acquisition costs and higher customer lifetime value.

The new goal is therefore to build and maintain a lasting relationship. This requires a different approach because relationship building is fundamentally different from the hunt for acquisition. We know from psychology: relationships develop over time, during which you go through the phases of getting to know each other, establishing a solid relationship, and the everyday life phase. What you have heard about your partner affects the beginning of the relationship, but what you actually experience with him or her determines the quality and duration of the relationship. In marketing terms, this means: product & service experience, tonality and critical incidents are more important for a relationship than brand image, marketing communication and reporting. Unlike interpersonal relationships corporate-customer relationships are utilitarian: customers are only interested in your brand in order to get a certain job done. Therefore, a good brand-customer relationship is the sum of predominantly positive and useful encounters, together with the prospect of further such experiences.

If you look closely, you can see that customers perceive this relationship differently than companies. One side thinks in terms of functions, e.g. R&D, sales, customer service, while the other side experiences encounters over time and tries to integrate them into a meaningful whole. The “Customer Journey” tool, which has become rapidly known in the company’s repertoire, helps to change perspective: the customer’s experience along the various encounters is mapped chronologically – and thus the ups and downs of the relationship. You quickly notice that customers are concerned with holistic actions (e.g. exchanging a device) and not with the individual interactions that are so often measured with the Net Promoter Score (“How satisfied are you with the phone call you just made?”). The chronological order of interactions also plays a role – B after A is not the same as A after B. Of great importance, however, is the experienced interplay of company functions. Breaks in it irritate, reduce satisfaction and, in the worst case, break promises made. If the customer experiences his provider as communication impaired the relationship suffers and will be terminated in the worst case.

True strength comes from within

A major influence on the customer relationship is how positive and useful customers experience encounters across the entire chain of information, presentation, purchase, use and service, and how consistent these encounters are in their interplay.  

A major influence on the customer relationship is how positive and useful customers experience encounters across the entire chain of information, presentation, purchase, use and service, and how consistent these encounters are in their interplay.  In consequence, more business functions – and therefore more employees – have an influence on the relationship than it seems: internal processes can obstruct the path to useful features, KPIs can encourage employees to handle customers as briefly as possible at the service line. This is a significant difference from the current pre-buy marketing approach, which is often outsourced.

This is where Customer Centricity comes in. In the companies surveyed, approaches were aimed not only at product innovation but also at processes, KPIs, structures and culture in order to align these with the maxim of lasting customer relationships instead of purely cost efficiency, as was previously the case. This makes Customer Centricity a management principle, its establishment a management task: it is about changing the objective and creating the necessary framework to enable necessary actions. Accordingly, many of the units surveyed in the companies surveyed were mostly located in or close to management.

Competences on the way to a customer-centric organization

In discussions with the business experts, we were able to identify a number of elements that pave the way to becoming a customer-centric company. These building blocks can occur individually, but in some cases they are mutually dependent. The rule is: the more of these are implemented, the greater the effects on Customer Centricity.

  1. Commitment and support from top management: Everything starts with top management. Customer Centricity must be understood, wanted, and supported from the very top. With commitment and company-wide set signs, the senior management paves the way for change and gives the topic the necessary strength to be realized. It must be clear that it is not a matter of temporarily improving customer experience, but that it is about a vision of a fundamental transformation. On the practical side, an internal mission statement, a so-called “Purpose”, that reflects the value created for customers, is of great help. In addition, our experience shows that the integration of initiatives and the linking of objectives at the strategic level is essential. 
  2. Deep, qualitative customer understanding: Knowing customers and understanding their unspoken needs is a key competence. A comprehensive picture includes understanding how a product is used and what users ultimately want to achieve with it. This means to complement the obligatory questions of “how often/how many”, answered by quantitative research and Big Data, with answering the question of “why” – what motivation lies behind behavior and opinions. “Thick data” – knowledge gained through psychological, ethnographic, and anthropological methods – helps here. For details, we recommend the excellent article “Big Data Is Only Half the Data Marketers Need” in Harvard Business Review 11/2015. To this end, qualitative approaches must be added to the toolbox. Additionally, a continuous knowledge-gaining process across the complete Customer Journey is advisable rather than doing isolated probes.
  3. Customer-centric interactions and offerings: From our point of view, the core of customer-centric offerings is simplicity, added value, and a positive user experience. Yet not only products or product features can be designed in that way, but also service experiences, spaces, complete ecosystems, communication campaigns, or brand identities. The most successful designs are those that consistently follow the customer-centric approach from idea to development and from testing to product launch. This ability is the most widespread within customer-centric approaches, and it is fuelled by a variety of innovation methods and coaches. It is the most commonly used, and often the only one, which falls short of receiving the full effect of Customer Centricity. 
  4. Alternative tools, processes, structures: The choice of internal tools and processes directly affects results, but also affect employee attitude towards a topic. Some of the tools and methods used are now quite popular, e.g., Personas, Customer Journey, or Design Thinking. Next, to enabling more customer-centric products, experiences, etc., they put customer related aspects more into the focus of employees. The term “agile” in relation to processes should also be familiar. Instead of immediately creating final solutions, agile processes first build prototypes, then test, and finally improve them. This way, the process helps to move from prototype to final solution in small, fail-safe iterative steps. This is necessary because of the high complexity of today’s world no longer permits anticipatory planning. Finally, more open, self-organized corporate structures also come into play here, since agility and rigid chains of command hinder each other.
  5. Guidelines & KPIs from a customer perspective: Guidelines and KPIs are designed to evaluate and guide employee behavior. Both binding and rewarding elements have proven to be effective. The choice of indicators needs to be aligned with creating value for customers. The Net Promoter Score is undoubtedly the most well-known but can be taken ad absurdum if it refers to micro-interactions (evaluation of a telephone call), instead of being applied to customers goals (exchanging a defective product). Evaluating employee behavior against guidelines should be with an attitude of improvement (“What can I do better?”), and less as a final evaluation (“How good were we?”).
  6. Initiatives for cultural change: The highest competence of a customer-centric company is the ability to change the mindset. “Only when every mechanic thinks of the customer when repairing the seat have we achieved our goal,” said one of our interview participants. Cultural change is undoubtedly one of the most challenging goals a company can aspire to, but some elements of Customer Centricity can help. Spreading knowledge about the customer throughout the organization, and making customer feedback for employees experienceable directly and emotionally is a highly effective method. For many employees, but also for the management alike, it is enlightening to come again and again into contact with “real” customers and listen to their stories in an unfiltered way. Systematically implementing case studies and using them for internal communication via storytelling is also very helpful. In addition, some companies train multipliers which assist in implementation and help to spread the idea in the organization. Ultimately, a customer-centric corporate culture is about a path of openness, learning, and continuous change.
Areas of attention for Customer Centricity
Elements needed to be addressed to turn a business into a Customer Centric organization

Back to the Future 

„To produce customers [that eagerly follow a business], the entire corporation must be viewed as a customer-creating and customer satisfying organism. Management must think of itself not as producing products but as providing customer-creating value satisfactions. It must push this idea into every nook and cranny of the organization.”

Sixty years ago, the marketing mastermind Theodore Levitt wrote these lines. So what’s new about Customer Centricity? Certainly not the method of focusing on the customer. This message is repeated like a mantra, even if it often doesn’t seem to have arrived. What is new, however, is the consistency and methodology with which this path can and must be taken today. And it is even more necessary today, as the business world is characterized by hyper-competition from globalized offers, as well as by increasing service demands from customers. And it is even more possible, as digitalization makes it easier to satisfy wishes and needs than ever before.

Consistency in this case means above all integration and a holistic approach which implies providing orientation through a mission statement, and establishing tools, processes, and guidelines to create user-centred and valuable offers and encounters. As a result of increased specialization, we run the risk of thinking fragmented — in performance marketing, big data or technical innovation. However, customers perceive corporate actions holistically and feel when they themselves are really taken seriously and are being put in the center of attention. They appreciate this because it is easier for them not to have to rethink every (purchase) decision in a world of abundance. At the same time they are much more willing to change providers if they feel their needs are not being catered to sufficiently. 

Integration and a holistic approach are based on management that sees its core task in inspiring and facilitating long-term customer relationships. For marketing as a discipline there is an opportunity to generate value for the entire company and strengthen its position by being the enabler of relationships with customers. Finally, Customer Centricity can become the guiding principle which technically driven digital transformation processes lack so urgently. Finally, Customer Centricity can become the guiding principle that “Digital Transformation” so urgently require.

Also, Customer Centricity gives people within organizations a new, motivating meaning: the value of their work is no longer determined solely by the pursuit of profit, but by the benefit and added value for the customer. People who work in a customer-oriented company feel a deeper sense of purpose in their work, have more fun, and are prouder of their organization.

Ultimately, Customer Centricity means a more human form of doing business and is a sign of maturity and growth. Orientation towards human beings is a ‘higher purpose’, the highest goal that a company can pursue. Because: Only an economy that revolves around people is a meaningful economy.

Share:

Share on email
Share on linkedin
Share on twitter

Explore more Ideas