Customer centricity: Customer Value, Customer Retention, Customer Relationship

Customer retention through customer centricity

Customer centricity is becoming increasingly important as a competitive differentiator. The various customer retention activities should be well orchestrated and aligned with other customer value management processes.

Improve the Customer Journey and Customer Experience

Many business activities contribute directly to customer satisfaction and loyalty. Others are evolving to become more important in the basket of applied customer centricity tasks.

As the business world becomes more efficient and customers gain additional tools for transparency and insight, many formerly "back office" and operational tasks are now more visible to the outside world.

As management strives to more directly improve the customer experience while controlling costs, efficiency and impact are key considerations for customer value management.

Organizational divisions and disconnects impede customer focus effectiveness

A common evolutionary problem is the distance and disconnect between the various disciplines that impact customer loyalty and satisfaction. This leads to inefficiencies, misalignment, and duplication of effort.

For example, win-loss analysis may be performed and understood by sales, but the insights don't find their way to the originators of the mistakes that led the customer to take business from the competition.

Or value propositions simply reflect the expert opinion of the commercial units, but fail to include the voice of the customer and the win-bid analysis piece from the customer's perspective.

Customer centricity is not measured and managed as a business value.

But the inefficiencies and lack of impact don't stop there. Many companies lack a complete understanding of the true cost-benefit equation of the customer relationship.

In addition, short-term results do little to inform long-term customer interaction strategy. Fragmented measurements and lack of aligned metrics never allow for transparent, meaningful measurement of customer excellence.

If management wants to transform the organization into a truly customer-centric machine, how would they measure and manage the activities and people involved?

Designing the organization for competitive advantage

Passionate customer advocates alone cannot maneuver around a fragmented organization that means well but is ill-equipped to eat, drink, and sleep customer centricity.

A truly customer-centric organization requires a philosophy, a culture that cherishes the moment when the customer makes a good decision to go with a competitor.

It also requires confidence that management will lead the way, carry the banner of customer value, and provide the tools for everyone to deliver on this customer-centric vision.

The RIGHT customer centricity for all stakeholders

Customer-centric culture and a common blueprint for managing customer value

A common blueprint and understanding of the elements of managing value to and from the customer doesn't necessarily mean that all activities and responsibilities need to be within one function or group.

But it does need to be visualized, managed and reported as a business driver or new customer-centric culture.

A bold baseline to protect and grow the bottom line

Customer-centric organizations should start with three key considerations that address the long-term growth and protection of the company's bottom line:

Are we serving the right customers?

Are we investing in the right relationships?

Do we understand how to retain the right customers and do we retain the right customers?

Right customer relationships

Do customers fit the business model?

Are they expecting services that can't be provided or that a company doesn't want to provide?

For example: Fiat can't and won't try to have a customer relationship with an owner of a Maybach high-end luxury sedan. The products and services don't match the customer's expectations.

Winning that customer's business would require a completely new product. Keeping the customer loyal and satisfied would focus enormous resources on that one customer. Fiat's business model is not positioned to deliver the expected customer value.

In order to build relationships with the right customers, it is necessary to know which customer has what expectations for the products and services, and whether they can be sold to that customer at her price expectations.

Customer value curves can visualize the different types of expected values and how to serve them. A thorough understanding of the customer would help assign customers or customer groups to the different value types or service levels.

When customer satisfaction is measured repeatedly, a result of this measurement can be used to determine overall customer loyalty patterns. They help to understand what services and deliverables need to be repeated to keep the customer coming back.

To test the hypothesis from the data and anecdotal feedback from the sales force, a reality check with the customers themselves can help refine the understanding of the key value drivers of their satisfaction and, consequently, their loyalty.

Getting customer retention right

What needs to be improved to retain customers?

How must a customer-centric organization respond to failure?

What communication and collaborative approach will motivate the customer to stay?

Continuous improvement programs as a result of customer satisfaction measurement need to convince the customer that they are the center of attention. On good days and not-so-good days (with the not-so-good days dealt with rigorously and sustainably).

Bid/win/loss analysis provides further evidence of whether a company is hitting the mark or needs to improve in order to continue to win customers' trust and business.

What motivates the customer to come back or stay away as a result of the direct interaction and experience with the product and staff needs to be thoroughly researched and communicated internally.

Only when these motivators are known can appropriate value propositions be created for each individual customer (or customer segment in larger, fragmented organizations) to convince them that the company is delivering the most satisfying individual value and is continually improving to do so.

It should be noted that many companies fail to transfer this knowledge deeper into the organization. When customers interact with employees outside the commercial comfort zone, it is a common fact that many operational or technical people are not able to deliver directly into the customer's value concept.

The simple reason is a mediocre internal flow of customer information. Competitors who do a better job in this regard can easily achieve stronger and more sustainable customer loyalty.

It is the equivalent of the chef in the kitchen knowing exactly how you want your breakfast egg prepared without even interacting with you that morning.

The right customers

How much does it cost to acquire a customer?

What is the value to the bottom line over the lifetime of a customer relationship?

Based on the available service levels, customers are acquired in a specific customer segment. Once the customer acquisition cost is known, a customer profitability break-even point is calculated and delivered.

Any value above the break-even point is the result of the company's passionate customer value management, which seeks to extend the customer's lifetime value as much as possible.

The better the various activities in this model are internally aligned and the more customer-centric capabilities are supported with simple but effective tools, the easier it is to create and sustain a true customer-centric culture that will outperform the competition, increase customer retention and improve customer relationships.

At the end of the day, however, it all comes down to how management sings the gospel of customer excellence and how they walk the talk. A truly customer-centric leader would ask his commercial teams some of the questions above and demand evidence of continuous improvement in this direction.