This article is based on research undertaken by Professor Moira Clark, Dr Andrew Myers and their team at the Henley Centre for Customer Management, Henley Business School.
The customer / business paradigm has certainly shifted in recent years. Organisations from all industries have come to realise one simple truth: a business that puts customers at the heart and centre is a successful business. This is particularly true within regulated service industries, in which there are specific obligations to treat customers fairly.
The old ideas and measures of “customer satisfaction”, “customer service” and even “customer relationship management” are well-trodden and no longer sufficient to truly capture consumer sentiment and develop strategies to retain paying customers. We no longer live in a transactional or product-centric world economy – we live in one powered by incredible amounts of widely-available data and built around an economy of reputation. The average consumer has greater access to the conversation (and the value chain) than those generations that came before them. They also expect more personalised service, faster ways of transacting and a wider variety of channels through which they can communicate.
We need a more contemporary measure and a better way of developing and maintaining relationships with customers. Organisations need to ensure that they are totally “customer-centric”.
But how does “customer-centricity” differ from “customer service”? And how does a firm measure and assess itself in this regard?
The customer-centric firm
Customer-centricity begins with the simple recognition that the customer is an active and central participant in the value creation process. Customers should be considered the heart of any business and that attitude should permeate every decision made. There is a clear business case for taking this approach; research and observation suggest that companies that are ‘customer-centric’ are much more successful than companies that are not.
Customers provide valuable, on-the-ground insight and are more than willing to share it, with the expectation that they will be heard and their ideas implemented. In this regard, ‘the customer’ as a concept should be considered an important member of any boardroom (this being a custom that a certain high-profile American multi-billionaire is known to champion). They are, after all, an essential voice in the decision-making process.
It should be noted, however, that there is no ‘average’ customer to the customer-centric firm. A business like this does not focus on product features or selling to as many people as possible. A customer-centric business will focus instead on customer retention – using data gathered from feedback and open-sources to identify and segment the most retainable customers. The customer-centric firm will then develop their offerings to these customers’ needs and desires.
As Professor Moira Clark of the Henley Business School says, “Customer-centricity … is about having long-term, mutually trusting and profitable relationships with your customers.”
Customer-centricity ensures that your business stands out in an increasingly competitive marketplace.
“[Customer-centricity] has become even more vital as companies are becoming increasingly commoditised. One airline is like another, and one bank is much like another. It is easy to copy your competitors’ products and services, but the thing that cannot be copied – the thing that gives you a sustainable competitive advantage – is the quality and history of your relationships with your customers.” Says Professor Clark.
“It’s about how customer focused you are. It’s about having the right people, doing the right things, with the right attitude and genuinely caring about the customer. That’s what customer-centricity is all about, and that’s what customers remember!”
Customer-centricity and regulation
For regulated firms, such as financial services or utilities providers, customer-centricity equates to building service offerings and price structures that suit the customers that are most in need of it. Regulatory obligations, such as the FCA’s Principles, almost universally require organisations to pay due regard to the interest of consumers, take responsibility for any assets entrusted to them and treat customers fairly. Much has also been said recently about vulnerability and the need for firms to rethink how they determine suitability and offer advice.
A customer-centric firm will likely find that meeting these obligations is a relatively simple matter. Documenting how your firm maintains continuous contact with your customer base (and how feedback is implemented) would be a sensible step towards demonstrating a culture of compliance with customer-focussed regulation.
The key ingredients of a customer-centric culture
Developing a customer-centric culture is not a straightforward process, though many of the keys to success will be relatively simple to understand. Some of these keys include:
- Gaining customer insight
- Capturing and reacting to customer feedback
- Becoming a trusted brand, an organisation that can be relied on
- Having the right customer-focused people in your organisation with the right attitude
- Making customer-centricity part of company culture
- Looking after your staff so that they can look after the customer
- Recognising the need for change
- Having a clear vision of the level you want to achieve
- Fostering an appealing customer journey by paying close attention to the design of experiences at every touch-point
How do you measure customer-centricity?
While such an abstract concept does seem, on the surface, quite impossible to study and measure, there are a number of very simple equations that can be utilised to understand how well you are positioning your business around your customers.
For example, you could measure your firm’s success in this field by measuring a Customer’s Lifetime Value (CLV), essentially how much a customer is ‘worth’ over their lifetime. This measure will help firms make a business case for the continuous investment in customers. It is calculated as below:
Another measure that may be familiar to businesses already is the Net Promoter Score (NPS). This is particularly important for gauging overall satisfaction with a company’s product or serviceCUSTOMERS LIFETIM
VALUE, as well as customer loyalty and the likelihood of them recommending your business to others.
When surveying customers about their satisfaction with products and services on a scale of 0 (not likely to recommend) to 10 (extremely likely to recommend), it is necessary to understand that only those who score a company at either 9 or 10 will be ‘Promoters’. These are your strongest advocates; the type of customers that should be figuratively sitting on the board.
Customers who rate your products or services as either 7 or 8 should be counted as the ‘Passives’, whilst those who score your firm 6 or below will be active ‘Detractors’ to your brand. Once this information has been collected, measure your success in customer-centricity by deducting the percentage of active Detractors from your active Promoters.
Is the customer really at the centre of your business?
Whether your firm deals in motor finance, utilities or mortgages (or anything in between), providing excellent outcomes for your customers and evidencing a culture of compliance to regulators will ensure that your firm consistently comes out ahead. Customers will certainly invest more and remain loyal to your product or service if they know that the experience is being designed for them.
Naturally, this customer-focused culture should come from the top. Firms should have a clearly articulated vision that is understood from the board down, through frontline teams and delivered straight to the customer themselves. Frontline and customer-facing teams will be particularly important in ensuring your firm’s reputation remains gleaming. They should be given the right tools and training to empower them to deliver constantly and consistently for the customer.
Finally, meaningful data is a key requirement in enhancing customer-centricity. Data and ongoing feedback should drive decision making as if the customer was truly a voice within the boardroom.
A customer-centric business will be one that constantly puts itself ‘in the shoes’ of its customers. Not only will this kind of business minimise the effort that customers will have to expend in finding the right solution for their issues, it will also maximise customer value at every stage.