Many of today's leaders look at large and dominant organisations and see their success based on the products they have sold, and believe that this is a pattern to be followed. But doing so ignores how times have changed. And it ignores how customers have changed.
These days, customers are more influenced by social proof and opinion than by advertising. Customers no longer accept being sold to, they want to buy.
Digital tools and an abundance of easily accessible information allow a very significant part of a customer journey to be completed before a potential customer needs to interact with the company whose product or service attracts them. At the point that they do engage it is often the customer experience which determines the outcome. Expectations are rising and we are entering an experience economy. Gen Z and Millennials are priced out of owning many tangible artefacts, so instead they rent a house, rent a car, rent music and film, and when they do buy, they expect a personalised experience and for that experience to augment the thrill of ownership.
Back in the late 1700's, new energy sources and manufacturing techniques created the ability for mass production and led to the industrial revolution. This created a new challenge - the need to inform potential buyers about what was new and what has recently become affordable - and the discipline of marketing was born. And this marketing was a based on a product-led economy.
But marketing is, in essence, a series of interventions into our consciousness, competing for our attention. A declaration of success is, perhaps, a response rate of 10%, but do you really want nearly everyone you approach to say 'no'?
These days customers have become immune to marketing messages. They want to buy, not be sold to.
A product-led organisation creates products and services to deliver core capability to its chosen consumer, commercial, institutional or government markets and then addresses the benefit of those products to services to as many customers as possible who have these needs. It's an 'if you build it, they will come' approach.
Companies with a product-led approach obsess over the products they sell and the activities required to sell them. Their marketing strategy is simply to shift as many products and services as possible, to as many people as possible, at the best price possible.
But by organising around product expertise, they miss out on strategies to acquire and retain higher-value customers.
Customer-centricity flips the process around and starts with the individual customer. The aim is then to meet the needs of that customer, and customers with similar personas, to the greatest extent possible. The world of selling products is replaced by the world of solving problems.
Price is often perceived as the main determinant of value. To add value, companies need to build their relationships with customers and prospects both directly and indrectly through brand values. Customer-centric organisations create more value for their customers, brand and product. Assuming that function, quality and price are all acceptable then it is the whole customer experience which determines a sale and, by extension, revenue.
For customers, products are simply a means to an end. An organisation can sell them a product, but by having a meaningful engagement, they better understand what the customer wants to achieve and can make sure that the product actually sold truly does meet the need. You could sell the customer a new mattress, but what they really want is a better night's sleep. Knowing this could mean the sale of some high quality, cool and crisp bedlinen too.
Research suggests that businesses that are successful at customer-centricity outperform industry peers two-to-one in revenue growth and generate margins 5%-10% above their competitors. B2C companies tend to be more customer-centric, B2B organisations are more product focused, so they have more to gain by pivoting to be a customer-centric company - the ability to achieve a better competitive position, to realise greater market momentum, increased market share, improved return on shareholder equity and faster growth.
Knowledge of customers and their behaviour is the new unit of corporate valuation
Most big firms still operate on the basis that their main purpose is to make money and please investors, with the delivery of customer value as a happy by-product. Too many companies still organise around products and services instead of putting customer needs and their organisation's contribution to society first.
That is not surprising considering that the traditional value chain is product-centric. Think Architect-Design-Build-Sell-Service, and the Porter Internal Value Chain Model. Things happen in a certain order, and that order has been set for generations of commercial activity.
But what if your company builds an informed knowledge of its marketplace and a detailed understanding of its customers and their personas? What if it truly engages with customers, and aligns around its commitments to them? What if it could truly validate and attribute the ROI on activities it performs to inform the marketplace of the value it can deliver?
Customer knowledge brings competitive advantage, and a whole business agility to respond to changes in the market, in technology and in customer preference and behaviour. Your channels to market can be disrupted and your products mimicked, but the value of a firm is no longer found in its own assets, rather it is defined by its network of relationships and the customer experience it delivers.
In a product-led organisation, the tangible assets such as factories, offices, distribution, stock in warehouse are recognised as around 80% of the value of the company, and intangibles such as brand and customer value the remaining 20%. In customer-centric companies, the reverse is true. The loyalty of customers, the positive endorsement to their social networks are fast becoming the asset of premium corporate value.
The strength of the corporate knowledge of, and interaction with, its customers, and the strength of their experience has become the main determinant of revenue, and customer-based corporate value will soon become the prime metric for valuing a company.
Reversing the value chain
Becoming customer centric means starting with undertanding customer needs and priorities. Customer data, market data and competitive intelligence are the tools at your disposal. This data needs to be dug out of the systems you already have, or new solutions put in place to gather the raw indicators and feed the analytics which will provide the insight you need.
This same data analytics will help you undertand the best goto market channels to meet your customers need. And it will inform which of your products will work best for those channels.
You still need to make or acquire your products or services, but the way you take them to market changes. You create the value proposition, you then deliver the value and finally you communicate the value which has been delivered.
Steps to customer-centricity
If you’re an established company with a lack of customer knowledge, data in separate marketing, product, sales and finance buckets, and a bonus structure that rewards revenue generation rather than lifetime customer value, then you need to change tack.
These steps will require your leadership - making the transformation means changing how you interact with your customers and how you operate your company.
- Map your customers' journey. This is the starting point. You need to see what they see, when they see it, so that you can identify where the opportunities for improvement are at each interaction point.
- Improve your ability to target brand building spend in your target market, and track the effectivesss of that spend against revenue.
- Remember that the the quality of experience can only be judged by the customer. Their perception is your reality.
- Ask your customers what they think, and why they think it. This goes beyond Net Promoter Scores or Satisfaction Surveys. When you get some new insight, then act on it.
- Co-creation will make your products and services more relevant to your customer set, so get them involved in the design experience, and embrace their thoughts on what is needed.
- Store your customer data in one place, so that you can actually see the whole picture, and the interaction trails that each customer leaves behind.
- Define the customer experience that you want your customers to have. Make sure that you align your operations and brand to the actual customer experience.
- Your staff are on the frontline and have the insight that matches customer and internal operations. Empower your employees to make the decisions that they are uniquely positioned to make, and reward them for meeting the customer need.
Keep these three thoughts front of mind:
- Customer not transaction. Move away from selling products or services to anyone who steps forward as a result of your team's marketing manipulations. Instead focus on the whole customer journey and the lifetime value of that customer. To do this you need to understand every aspect of your interactions with prospects and customers.
- Solutions vs. Selling. This is a mindset and an execution challenge. Understand the customer need and work out how you can profitably give them what they want should be the basis of all of your business decisions. This includes your products, your channels and your partners. Understanding the ROI on key messages to the marketplace is crucial.
- Cross-functional vs. hierarchical. All customer interaction and experiences happen through your marketing, sales and service people - daily. They need the un-interupted backup of colleagues who precede them in the internal value-chain, and the whole team need to be engaged, empowered and directing, able to make decisions there and then without fear of recrimination. You may need to restructure your reporting lines to remove hierarchical silos and create value stream teams instead.
Customer-centricity delivers the value needed
We have moved on from:
- What products and services can we sell to what does our customer need to meet their need?
- What relationship do we need to establish to what type of relationship would out clients expect from us?
- How can we sell more to what value should we offer our clients so that they are happy to pay us?
Customers have two questions: what do I want to achieve, and how much time and money do I need to spend to actually achieve it. Successful companies know that they have to have the products ready to be chosen, but that the experience that the customer has when interacting with the company is more important.
Product-led business has diminishing relevance at a time when the customer shapes the interaction with a company, when customers are informed buyers rather than people who were sold, and who are willing to to provide positive endorsement to organisations who give them value and an acceptable price.
The totality of the whole customer experience is what now delivers greatest business value, day-to-day and as exit valuation.
We have moved on from 'closing the sale' to 'opening the relationship'. Our relationship with our customers and their experience of that interactions in what will drive business in the next decade.
Aston Beck can help you pivot from selling products to your customers buying the value you deliver. If you'd like to chat about how we can work together, then please get in touch.Drop us a line