A Blog by Jonathan Low


Sep 9, 2013

Are All Customers Created Equal?

We are emerging, cautiously and not a little beaten up, from The Shareholder Era. Shareholders, for much of the decade or two prior to the financial crisis were given pride of place in corporate cogitations about whose interests had first to be served above all others. We have all seen how that worked out.

And by the end, which is to say, in the past five years since the crisis, even Chief Financial Officers are wont to admit that it all went a bit too far. That hedge funds and private equity firms are now 'reimagining' their fee structures suggests that they, too, recognize that this jig is up.

But a new shibboleth is arising, promising to be as powerful - and potentially destabilizing - as the last one. We speak, of course, about The Customer.

The Customer is, naturally, not just important but essential. Without customers there is no business. As obvious as this sounds, they did not rank very highly in the canon of Shareholder Era sentiment. From the standpoint of financial eminence, customers were presumed to be malleable creatures wont to do what they were told by their betters. But five years of depressed sales will make a believer out of anyone who is shocked to discover that in the rapidly evolving digital age they can no longer look to Michael Porter or Peter Drucker for every solution to every problem.

What technology has done is give us a lot more information than we have ever had about customers plural and customers individual. This has enabled enterprises to be more focused on what they are attempting to sell, not just to who, but when and where and how. So, not only has The Customer lost its collective meaning, but individual customers may each contain several selves - think multi, rather than bipolar...all with the same good credit rating. Depending on what is being sold in which venue, then corrected for time, location and a host of other factors, The Customer will have different value for alternative businesses. The result is more complication rather than less, albeit with a theoretically enhanced chance of a successful sale.

Which is all lovely. It may improve results, especially market share and margins. But we are left with some lingering questions. A shibboleth is a belief that others find devoid of meaning. So elevating The Customer to the same perch on which The Shareholder once pranced seems fraught with potential for miscalculation. Customers are variously important to different companies selling multiple products or services in numerous global markets at wildly varying times and prices. Which is to say that such attempts at discerning value must now sliced and diced with ever more finely wrought degrees of specificity. There is no such thing as customer equality, if there ever was, but we will all be better - and richer - for making sure we understand the how and why of it. JL

Paul Jarman comments in Wired:

Each customer brings a different value to a company – as such, companies can no longer approach each customer with an identical level of support, and must start tailoring their services to the specific needs of varying customers. Doing so will not only develop a trusting and loyal relationship with your customers, but especially your most profitable ones.
Companies like to say that all customers are treated equally, but is this really the case? Perhaps the more appropriate questions is whether they should be seen as equal. Harvard professor Robert S. Kaplan researched this very issue extensively and concluded that happy customers are good, but profitable customers are even better. He found that in virtually every customer profitability study ever done, 15 percent to 20 percent of the customers generate 100 percent (or more) of a company’s profits.
So what does this mean in practice? In an era where customers are not as brand loyal as they used to be, the importance of providing them a high quality yet more personal experience has become paramount.

Why Does Service Differentiation Matter?
By treating different customers differently, you can gain competitive advantage over your rivals who may be treating customers without any differentiation. According to Accenture, companies that optimize their customer service based on varying levels of customer value have increased their revenues by two percent while reducing operating costs by eight percent. And when you look at the continued rise of social media and the proliferation of smartphones and tablets, it is clear that customers desire to take control of their experience -- they want on-demand service on their own terms.
In addition to providing the best experience possible for your customer, companies cannot afford to neglect the critical financial aspect of their customer relationships -- this means maximizing the lifetime value of each customer and minimizing the cost of each customer interaction.
The Keys to Treating Customers Differently
First, you must identify which of your customers need to be treated differently based on your business goals. Direct financial value is a top priority, but don’t forget that your most vocal customers may be valuable in other ways that may be difficult to measure. For example, a customer with a high Klout score may deserve preferential treatment based on the impact he or she can have on the perception of your company and brand. More importantly, customers who are more engaged with a company’s social media channels spend up to 40% more than other customers, and even customers using social media to complain spent an extra 20% more than other customers, according to a recent Bain and Company study.
Understand which parts of the service experience matter most to customers. Most organizations still have an inside-out view of the customer experience rather than a customer-centric view, but it’s critical to personalize service to meet the unique needs and preferences of your most valuable customers. One of the most common mistakes that companies make is to automate what is most painful or inconvenient for them rather than address these tough challenges from the customer perspective. Making sure you approach this appropriately is even more important when dealing with your best customers.
Your highest-value customers should be helped by top-rated, experienced agents and not have to wait on hold. Elite fliers or platinum cardholders, for instance, are often given dedicated channels -- both via phone and via web, chat, and email -- that are crafted to give them a unique premium experience. These customers may also be given direct access to tailored resources and other special perks.
On the other hand, lower-value customers can be assigned to newer agents and encouraged to use self-service or automated apps that that are easy to use and rewarding. A good general rule is that the amount of personalization a customer enjoys should be commensurate with his or his relative value to your organization.
The third key is to make sure you are truly delivering service differently to the customers who matter most. Customers that feel like a company is listening and responding to their needs in a timely manner are much more likely to develop a level of trust that leads them to longer, more prosperous relationships with the business. The cloud allows business to operate at a higher level of service while incorporating appropriate self-service options and utilizing employees with specialized skills to better serve customer needs based on differentiated value.
Implementing a value-based customer service program is not easy. It requires you looking more strategically at your customer data -- including CRM, social media profiles, and other relevant indicators of future financial value -- and segmenting your service levels and options appropriately without alienating customers in the process. But in this competitive economic environment, optimizing service differentiation is not just a sound business strategy. It is crucial to the current and long-term profitability of your company, and if you don’t do it more effectively, your competitors will.


Post a Comment