I was reading the HBR issue of Jan-Feb 2010, where Roger Martin describes the importance of Customer Capitalism. It is interesting to note how the business has changed over time- starting from managerial capitalism, to Jack Welch’s implementation and drive of shareholder value capitalism, and how today the business is focused on customer capitalism. Simply put, it is about improving the life and expectations of customers.
As a matter of fact, I found the big point to note from the article, is the fact that the scope of business improvement has always been driven by the need sets of customers– but the method of implementation of the same has been so different in all of these eras. In fact, the analysis of “what the customers’ want”, and the result of the outcome of the analysis that have been adopted by companies in the past, has largely shown that the companies at large and at different points of time are usually far away form answering the real need of the customer.
Come to think of it– even now, when we talk of customer capitalism, — there is a diverse opinion in the product driven organisations– should the organisation listen to what the customers want? If yes, you are actually then catering to the customers’ needs directly. However, the best of the product companies have only interpreted what the customers wanted– rather than taking that on face value. So we have Henry Ford who had said that if I listened to customers, they would have asked for faster horses. Again Steve Jobs from apple, claims not to listen to the customers. But actually end of day, the output from the same companies exceeds the expectations of the customers. So, the question then is – do they not talk to customers about their needs?
I feel the answer lies in the fact that these companies read between the lines when it comes to customers’ needs. yes, they do not take the literal words of the customers, but they extrapolate the need set to ensure that not only the customers’ need is met, they provide the extra cherry on the icing on the cake. That is what makes them stand out in the market. As a matter of fact, iPad sold 300,000 pieces on day one.
This seems to be a great case to look at from the perspective of the question “should we talk and listen to our customers?”. There was always this need for a third generation device between the mobile and the laptop– and number of companies tried it out- Sony, HP, Acer, and everyone else came up with the model of the net-books- all slim and sexy, but it was only Apple that launched the true third gen device in the form of iPad. So did the customers want an iPad? No one may have thought about it- till Apple has actually launched it. Apple read between the lines.
Thus extrapolating the information of the need seems to me as the key to success.
This is a classic example where customer capitalism is used as an instrument to drive business into newer heights. But only following the model of customer capitalism has not helped– it was backed by the tremendous charisma of Jobs who revealed to the world what the customers needed. Apple, actually Steve Jobs, has shown the world that marketing about the product’s “value” and the benefit that it brings to the lives of the people is the key ingredient of success in this age of customer capitalism.
But easier said than done, in an age like this where customers are the ultimate drivers, it is a tough balancing act to determine, to what extent the company is going to invest in getting the right mix which generates the maximum revenue. CEM or customer experience management, is a key activity in this customer driven world. I was reading a blog on CEM in the age of Customer Capitalism,(http://blog.vovici.com/blog/bid/26364/CEM-in-the-Age-of-Customer-Capitalism-Roundup) where I hit upon the following:(a copy from the above blog) “
- Don Peppers argues on John Oswald’s blog that you need a framework for making the hard decisions about priorities and investments. “If your marketing exec says, well if we want a good customer experience then we should just DO these kinds of things, then our question is: What if the cost is $100 million? Or $500 million? See the problem? At some point a balance has to be struck, but where? Simply saying that CXP leaders tend to have better financial results than CXP laggards won’t solve the hard problem of resource allocation. To solve this problem you need a metric for the benefits of customer-experience-management that can be converted to dollars and cents. That’s why we invented the financial metric, Return on Customer, a precisely quantifiable measure of the efficiency with which a company’s customers are creating value.”
Customer Capitalism presents one of those discontinuities in the marketplace that will separate the winners from the losers. Make sure to help position your company to be one of the winners by relentlessly focusing on measuring and prioritizing improvements to the customer experience
So, the catch is to “accurately determine”,how much you spend on ensuring the customers’ satisfaction by appropriate marketing and similar efforts for providing services, against what you really make as revenue in return.
This is a big yet niche subject– the dimensions in consideration are, the cost and effort spent on marketing and customer experience management, vis-a-vis the ROI. Easier said than done– I wonder how can one possible quantify the effort vs. the ROI.