Increasingly, corporate leaders in all industries are seeing the value of making their organizations customer-centric. What can customer-centricity mean to your company? How do you determine your company's potential? And what must you do to create, lead and maintain a truly customer-focused organization?
This four-part series of solutions-oriented articles by the four members of the Business Authors Leadership Alliance (BALA) demonstrates how techniques in strategy assessment, innovation, ROI analytics and organizational performance are integrated to leverage the discipline of capturing and applying customer insight to profitably grow your business.
In a recent study, Forrester Research found that over 90% of the senior executives interviewed said that having a single, fully integrated corporate view of customers across the enterprise—which we can call customer-centricity—was either critical to their organization (44%) or very important (48%). Yet only 2% think their organization has achieved full integration and 10% think their organization has achieved partial integration.
How can companies work toward achieving their desired goal of becoming a customer- centric organization?
Our process involves the following four phases:
- Identify key strategic customer-centric opportunities and challenges.
- Focus staff innovation and creativity to develop solutions for these challenges.
- Ensure and refine profitability potential of new initiatives.
- Address leadership and performance issues to ensure that the company can meet its objectives around these challenges.
Each of these four phases involves five action items, as shown in the following chart:
Each article in the four-part series will cover one phase of the BALA integrated process, including a structured example for illustration. This article (Part 1) will cover the five steps in Phase 1: Identify Strategic Opportunities and Challenges.
Example: Midwest Telecom
The company used in the case is real, but the name has been changed to protect the innocent. The situation and the processes have been adapted to effectively communicate the BALA process. In many respects, Midwest Telecom represents a typical organization in terms of what is known about the customer and how the enterprise addresses changing customer needs.
Here are some key facts:
- Midwest Telecom is a regional wireless service provider. Like many companies, Midwest has an array of customer-related challenges, beginning with the level of customer insight.
- Midwest has exhibited declining ability to attract new customers. Also, the rate of customer defection has increased substantially over the past 18 months.
- Senior management, concerned about this threat to revenue and profits, wants to turn the situation around as quickly as possible. The company has had a low level of awareness and understanding regarding customer needs and expectations.
- A new competitor, Upstart Telecom, has begun operations in Missouri. It is offering high-tech phones and other incentives to new customers. Midwest has already experienced substantial customer losses where Upstart operates. Using this example throughout, this article explores the essential customer centricity element in the first phase: customer insight, a deep understanding of who customers are, what they purchase and when, and what motivates supplier and channel selection decisions.
To build customer-centric strategies, companies must have a structured process for effectively capturing the right customer intelligence, transforming this intelligence to insight, and applying the insight in such a way that will lead to profitable relationships. The remainder of this first article summarizes the five steps we use to Identify Strategic Opportunities and Challenges.
1. Understand customer-centricity best practices
Creating a singular focus, throughout the company, on optimizing customer commitment and loyalty behavior is the key to both survival and success. A few companies—such as Southwest Airlines, MBNA, Baptist Health Care, Wegman's Supermarkets and USAA—are noted for having built cultures, processes and data systems so focused on customers that they are benchmarked by organizations around the world. Any company, however, can have the same results, irrespective of size or industry.
Key best practices in building and leveraging customer insight include the following:
- Building the 360-degree view of each customer
- Sharing access to all information across the organization
- Using each touchpoint and creating new ones to build the base of customer intelligence
- Fostering an environment that motivates customers to voice complaints
- Being responsive to the voice of the customer so that sharing information is recognized as a value to the customer as well as the company
Our example company, Midwest Telecom, had to first look at what the most successful companies in the telecom field, and other leading consumer service companies, were doing to create customer-centric cultures and processes.
Midwest formed an ad hoc customer-centricity team representing marketing, sales, customer service, and other key functional areas within the company. It also brought in a professional team facilitator to learn all it could about customer-focused best practices inside and outside the industry.
Midwest first identified companies with low customer churn, excellent internal information flow, and contributory, loyal employees. Then, Midwest arranged site visits so that the Midwest team members could learn and exchange ideas. In addition, Midwest compiled a portfolio of data about what leading customer-centric companies were accomplishing.
Finally, with the site visits and secondary data as perspective, the team members conducted a series of interviews with cross-sectional Midwest staff to have a better understanding of how customers were perceived and engaged by the organization. The team was then in a position to begin its journey toward customer centricity and to identify what, and how, the organization needed to change.
It was clear that among other changes Midwest was going to have to become far more customer-proactive and do a better job of understanding customer needs and expectations. Customers, for the first time, were segmented by level of usage over time so that their perceptions, and impact on the business, could be evaluated.
2. Assess your current customer intelligence and gaps
Bringing additional customer insight into your organization begins with an assessment of your current customer data. Most companies have some customer data, drawn principally from transactions. The feedback they get is largely reactive—when the customer initiates contact.
Studies have shown, however, that there are tremendous gaps between information and insight. An appropriate definition of customer insight might be “An assessment and interpretation of customer needs, problems, expectations and complaints that is thorough enough to provide value in the relationship with each customer.” Companies need disciplined techniques to gather, store, share and apply customer data so that it can be processed and distilled into strategic insight.
These are key questions to answer at this stage:
- Where is our business struggling based on a lack of customer insight?
- What business objectives can we accomplish by better using the intelligence we have?
- What strategies can we develop if we had better insight into the needs, problems, expectations and complaints of customers?
- What is the most important information we can learn from our customers that is actionable and establishes a clear competitive advantage?
Next, Midwest Telecom conducted an audit of what customer information was being collected and maintained in various databases, and also what was known about customer needs and wants through research. Having seen that there was little available customer insight, especially regarding what customers truly value, it designed a program of qualitative and quantitative research to address messaging and relationship challenges and opportunities.
The qualitative technique selected for the research was in-depth, one-on-one personal interviews. Although Midwest could have applied such methods as mini-groups and full focus groups to understand customers' perceptions on an anecdotal basis, one-on-one interviews were conducted because it was felt that each respondent would be able to provide more detailed insight.
The quantitative technique applied was telephone research, conducted by skilled executive interviewers. This was selected over self-completion methods (mail response or Internet) or personal interviews, as it provided the optimum combination of dimensional and probed answers, which could also be accurately projected to represent key customer segments.
They also looked at such related issues as employee loyalty and contribution to creating customer value, and the competitive impact Upstart was having on Midwest customers. This research became part of an ongoing set of customer-intelligence-gathering tools to monitor perceptions of Midwest's performance.
From this exercise, Midwest determined that the key business needs where customer insight is most critical were (1) better retention and cross-selling after customer acquisition, (2) quickly recognizing and resolving service problems, and (3) identifying vulnerable customers likely to defect to the new competitor.
3. Assess your ability to capture intelligence
At the core of such an effective model and set of processes is customer data. Most organizational performance challenges stem from customer information: lack of available quality data, poor storage and management, and ineffective sharing and application, to cite just a few. An understanding of the real value and impact of customer information, and a consistent, repeatable plan for gathering, sharing and using the data to make a company more customer-centric, are needed.
Key questions to answer at this stage include these:
- What existing customer touchpoints can we utilize to capture additional information?
- What information is so critical that we should consider creating new channels to capture intelligence from the customer?
- What information, especially demographic and psychographic, can most directly leverage, or influence, loyalty and advocacy behavior?
From what Midwest uncovered through its customer and culture research process, it was evident that it needed, as a first step, to leverage drivers of perceived customer value through more consistent performance, more relevant and timely customer messaging, and better, more proactive service.
Strategic customer research was conducted (by telephone, using skilled executive interviewers), focusing on understanding how customers perceived Midwest's performance and process effectiveness, change in performance over time, and their relationship and engagement with the company, plus identifying areas of emerging performance need and requirement.
In addition, the research examined preferred communication media, message content and timing issues, and both expressed and unexpressed complaint regarding all aspects of value delivery. So, the customer insight gained was relevant to every aspect of the positive experience Midwest aimed to create.
From an enterprise-wide customer-centricity perspective, it was also clear that sharing any and all customer data had to become a corporate priority; there was also a need for more cross-functional teamwork and planning on the customer's behalf. Management realized that the company would require discipline and guidance to address these issues.
4. Identify strategies to leverage insight
Once armed with this insight, the company recognized the need for an equally disciplined model for taking appropriate, effective customer-focused action. In this initial exploratory stage, it is important to have a vision of how strategies can be developed around new customer insight.
Key questions to answer at this stage include the following:
- Which customers were the most profitable, which were most “growable,” and which were draining profits?
- What aspects of messaging, service and performance required improvement to help optimize customer perceived value?
- What opportunities, and challenges, existed to build the business through upsell, cross-sell, referral, and information provision?
Midwest then began several initiatives, starting with development of a predictive performance model, especially focused in areas of prospective customer attrition and churn. The objective was to create an algorithm, or predictive tool, that would have as high a level of accuracy as possible and impact a significant proportion of Midwest Telecom's customer base.
The customer-centricity team took on assignments playing an active role in helping to refine the predictive model, plus setting targets for reducing churn levels, upselling and cross-selling existing customers, and setting up customer messaging programs.
5. Set your customer centricity objectives
The first stage of this process, when a company looks at customer-centricity best practices and assesses its own needs and potential, should position the company to establish its objectives and success criteria. Having this in place will equip the team to effectively innovate, plan and refine strategies that are designed for successful implementation and achieve profitability goals.
These are key questions to answer at this stage:
- What do we expect from our customer-centric improvements?
- What business objectives are our top priorities?
- What is the minimum financial impact that we expect from any initiative launched, and over what time period?
- What budget do we have to work with for a trial or launch of new initiatives?
- What quality and performance parameters will we set for our initiative?
Midwest Telecom recognized that it had a tremendous amount of work ahead to address these key issues and challenges, which impacted insight, customer experience management and touch processes, messaging, financial parameters, strategic and tactical planning considerations, and Midwest's very culture. Multiple sub-teams were formed so that each of the issues raised could be processed and managed in a disciplined, time-efficient and coordinated manner. Specifically, teams were created around profitability, customer experience and messaging, service, and sales objectives.
In the second article of this four-part series, Jeff Mauzy will take readers through the next key element of the BALA process—applying innovation and creativity to the challenges and opportunities the research has uncovered.
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