An Introduction to Customer Centricity

An Introduction to Customer Centricity

  • Dev Patnaik Dev Patnaik
  • Ryan Baum Ryan Baum
  • June 24, 2022

Over the last decade, most companies have realized the need to become customer-centric. And yet, very few actually are. Customer centricity isn’t just about digital tools to improve customer service. It’s a strategy and a culture: a way to differentiate and a way to make better decisions faster.

Whether you are hoping to change direction, ramp up an existing initiative or looking for a new path forward, a great strategy session has the ability to harness the power of your people and move your organization to the next level. Success comes when teams focus on the right questions, engage people to come up with great solutions and test their ideas through experimentation. Great strategy is never the product of a single moment in time, but the hundreds of decisions that follow. Set up your sessions to enable better decision-making and move your business forward.

Customer centricity has been all the rage in business circles over the last few years. And while everyone seems to be talking about it, few organizations seem to have a clear and compelling understanding of what customer centricity is.

In the midst of that ambiguity, different players have found it useful to define customer centricity in a way that serves their own interests. Market research companies define customer centricity as doing a lot of market research. Makers of customer relationship management software define it as using CRM tools. Customer feedback companies define it as having clear journey maps and metrics. Most of these perspectives are wildly unhelpful and fundamentally miss the point. If you strip away the shiny veneer of modern digital tools, they amount to little more than good ol’ fashioned customer service. And for any company looking to use customer centricity as a strategic lever, that’s just not enough.

Customer centricity isn’t about market research, although it’s often helpful to do some formal customer insights work as an input. Customer centricity isn’t about metrics alone, although having a couple of good metrics will tell you if your efforts are having an impact. Customer centricity isn’t about journey maps, although business leaders seem to love these diagrams for the illusion of certainty and quantification that they provide.

Customer centricity is about focusing an entire organization on the needs and mindsets of the people it serves. Imagine a place where every person has the same intuitive connection to the world of their customers. Not just the folks in marketing but the people who work in R&D, too. And finance. And HR. And legal. Imagine a place where a manager in Accounts Payable has a gut-level intuition for how her customers think. And then, when it comes time to revise the company billing policies, she realizes that there’s one way to change the system that might really help customers out. And another way that might totally enrage them. And she makes the right decision quickly and independently in a way that adds value for both customers and shareholders.

People in customer-centric companies possess a shared and intuitive vibe for what’s going on in the world that helps them to see new opportunities faster than their competitors, long before that information becomes explicit enough to read about in the Wall Street Journal. They have the courage of their convictions to take a risk on something new. And they have the gut-level intuition to see how their actions impact the people who matter most: the folks who buy their products, interact with their brand, and ultimately fund their 401(k) plans. That intuition transcends what’s traditionally referred to as market research. A widespread intuition for customers starts to influence the culture of a place, giving it a sense of clarity and mission. Perhaps most importantly, people spend less time arguing about things that ultimately don’t matter.

Customer centricity isn’t about process. It’s about strategy and culture. It’s a way to differentiate and a way to make better decisions faster.

It’s about strategy because customer centricity is a choice. A company that decides to be customer-centric has chosen to win through a specific approach to differentiation. It has concluded that the best way to compete is to develop an intimate relationship with customers and rely on that relationship to spark innovation. Facing the collapse of the U.S. retail sector, many companies simply closed stores, put items on perpetual sale, or made half-hearted attempts to beat Amazon at its own game. Target Corporation chose to compete by building deeper connections with its customers. That’s a choice.

It’s about culture because customer centricity is a set of norms and practices. A customer-centric company expects all employees to stay connected to customers on an ongoing basis, and use the intuition that results as a way to improve decision making. Nike is first and foremost a culture of athletes. The company hires athletes as employees and has them work in a physical environment that constantly reinforces the joy of competition and sports. As a result, people who work on running shoes are runners themselves, and they have an excellent intuitive feel for what makes a good running shoe. As a consequence, Nike designers, marketers, and engineers can make good intuitive decisions without relying on thick PowerPoint decks describing Nike’s customers. The company doesn’t implement processes to make sure employees play sports. It’s just part of the culture.

Developing a customer-centric organization isn’t an overnight switch. The changes required to both strategy formulation and culture development require sustained changes over time. And as with any organizational change, no single playbook will work across all companies. Still, five basic elements are common to every program.

1. Leadership

One of the most essential characteristics of a customer-centric company is a leadership team that demonstrates empathic behavior in its everyday work. A culture only changes when leaders model the behavior they’d like to see. By example, leaders can encourage the kinds of activities that build customer empathy, and even make it aspirational to do so. They are then uniquely positioned to demonstrated how decision making improves when you have an implicit intuition for the markets you serve.

Former Pizza Hut CEO Mike Rawlings was legendary for his commitment to understanding the people who dined on his pizza. Every Friday, he used his lunch hour to call his number-one customers: working-class single moms. He would phone them, introduce himself, express how much he valued their business and ask them if he could help them out in any way. This helped him know in his bones what kept these ordinary folks up at night. Rawlings helped his customers negotiate with power utilities, social services, and get other kinds of help they needed that went far beyond what to put on the dinner table. By making his commitment to people outside the company clear, Rawlings showed all of his employees why they were in business and how to have a positive impact on their customers. Lead by example and turn everyone in senior leadership into Chief Customer Officers.

2. Experiences

Nothing beats a face-to-face visit to the very place where your customers live their lives. That’s why empathic companies, whether consumer-facing or B-to-B, encourage and incentivize their employees to routinely meet with real customers on their own turf. This lets you capture the kinds of contextual information that gets lost over the phone. It also helps companies get out of their immediate spheres and into the world where their products and services actually get used. It may even bust the myths about customers that your company has been basing its strategy on.

When Lou Gerstner became IBM’s CEO in 1993, he created “Operation Bear Hug,” a massive program that required the company’s top 250 managers to visit at least five of the company’s biggest customers in just three months. And they weren’t there to make sales. Their task was to just listen to customers’ concerns and think about how IBM could help. At the time, it seemed like a crazy way to use executives’ time. But the company’s dramatic turn-around and successful entry into professional services revealed the wisdom of the move. Today, routine visits to customers are simply the way it works at IBM. Customer centricity doesn’t happen by PowerPoint. Skip the next presentation and ask teams to go hang out where customers actually live and breathe.

It can be incredibly helpful to lean on a company’s customer insights function when creating these sorts of experiences. The trick is to leverage these professionals as coaches, not experts. Consumer insight departments are often the keepers of information about the people a company serves. That means that they know more about customers than anyone else in the organization. In customer-centric organizations, by contrast, these folks act as coaches and facilitators. They create opportunities to learn about customers for everyone else in the organization. Their goal is to make everyone an expert, not to decide what information other people need to know.

Procter & Gamble exemplifies this principle. Several years back, P&G created the “Living It” program in which the consumer insight division arranged for managers and other employees to actually live for a few days in the homes of lower-income consumers. The same group also developed the “Working It” program which helped employees of all kinds to work behind the counters of small stores and see consumers up close and personal. On numerous occasions, P&G employees have come up with breakthrough ideas for products in response to unmet needs that they discovered through time spent with ordinary people in the world. These experiences were set up by the insights organization, but the people who went through them worked in every function and at every level of the company.

3. Environments

Too often, companies think of connecting with their customers as a series of one-offs rather than a constant presence. They confine all of the information they have about the outside world into a few consumer insight and market research reports. This makes it hard to develop a gut-level intuition for the folks they serve. A better approach is to make it an ambient part of everyday work. Turn the office into a virtual museum of information about your customers. With constant reminders about your customers in your work environment, you won’t be able to help but understand who you really work for.

Nike’s corporate campus looks like a college campus, minus the classrooms. It boasts soccer fields, basketball courts, running trails, and numerous outdoor gathering spaces. The buildings themselves are named after great athletes like Michael Jordan, Tiger Woods and Mia Hamm. Hallways inside buildings are named after famous stadiums. In this way, Nike’s space helps its employees to be constantly thinking about athletes and the culture of sports.

Folks who work at toy companies find themselves in an interesting position when it comes to customer centricity. After all, they make products for children, but none of them is actually a child. American Girl, a maker of books and dolls, has found ways to make it easy for its employees to get in the mindset of an 8-year-old girl. Girls and their parents send letters by the thousands into American Girl, praising the company for the things it does right, and demanding change where it’s needed. Rather than putting those letters in a file cabinet in the customer service department, American Girl posts them on the walls of the office, in cubicles, in break rooms and other common spaces so that there is not a soul in the company who doesn’t have a clear understanding of how little girls think and feel. The folks at American Girl get a clear sense of what they can do as individuals to make life more exciting for those girls. Your space is constantly sending a message about what’s important. If you want people to focus on customers, plaster your cubicles and hallways with constant reminders of the outside world.

4. Insights

While it’s crucial for customer-centric companies to reinforce existing knowledge, it’s equally important that they develop new ways of looking at customers. It’s not enough to simply reinforce what we already thought. Here’s where competent insights professionals can prove invaluable. A team of experienced insights experts will be adept at conducting the right qualitative and quantitative studies, uncovering new opportunities and providing businesses with actionable direction for what to do. These insights are the basis for any differentiating strategy of a customer-centric organization.

Of course, that assumes that you have a team that can come up with insights. The sad truth of the matter is that many companies lack the internal capabilities to produce real insights. Not long ago, a major multinational consumer packaged goods company conducted an audit of all the insight work it had completed over the last five years. It determined that nearly 65% of all of its “insights” were…not insightful. Insights reports included such scintillating findings as “Moms tend to separate their laundry into white loads and colored. White loads are usually washed in warm or hot water, while colored loads get washed in cold.” Insights teams should start with a common rubric for what actually makes an insight. This will vary by company and industry. Invariably, though, because customer-centric companies have a good intuition for the market, they tend to have a higher bar for what surprises them.

Insights can come from both qualitative and quantitative source data. The trick is to not over-index on one source at the expense of another. This is particularly important today when so many companies have access to previously unimaginable amounts of customer data flowing in through purchase transactions and online behavior. Some of the least customer-centric organizations are companies with the most data. Take banks for example. Almost by definition, banks enjoy access to massive information about their customers, from their net worth to their Social Security Number. That volume of data, however, has often obscured the ability of large financial service institutions to really dig beneath the numbers and find out what keeps their customers up at night.

5. Metrics

No customer centricity program is complete without a clear set of metrics for monitoring progress. You get what you measure. To that end, customer centricity metrics should measure three different components of the program: the level of activity, the level of empathy and the level of satisfaction.

Activity metrics should provide an ongoing dashboard of employee’s engagement with the program. This can include indicators of how many people were involved in empathy-building experiences or training programs. Harley-Davidson has created robust policies and metrics to ensure that it maintains a close connection to riders. Once managers hit a certain level of seniority, they are required to make two visits per year to events where motorcycle riders will be. These visits can be quite elaborate, like a trip out to Sturgis, South Dakota or Daytona, Florida. Or they can be humble, like taking a volunteer shift at a local Harley dealership picnic. The goal is simply to measure internal engagement.

Empathy metrics seek to track the level of intuition that employees have for their customers. Simply put: can employees put themselves in their customers’ shoes? While many different forms of this exist, the best metrics are structured on a logic that looks like The Newlywed Game. Employees are surveyed and asked two kinds of questions. The first set asks questions about their own lives and outlooks. The second set asks the employee to guess answers about their typical customers’ lives and outlooks. These results are then compared against the answers of actual customers. For instance, employees at an automobile manufacturer are asked “How often do you buy a new car?” and “How often does our typical customer buy a new car?” These responses are compared with customer surveys of how often they say they buy a new car. Points are awarded for getting the same answer. While there are many ways to structure this sort of survey, the goal is the same: to objectively assess how much our employees think like our customers.

Satisfaction metrics are the ultimate outcome of customer centricity work. Some companies look to assign real returns in terms of revenue or market share growth. While these would be ideal, it can be difficult to always make a bright line connection from customer centricity to top-line growth. Companies have had better success connecting centricity to customer satisfaction, typical in the form of the now well-established Net Promoter Score. Customers are asked, on a scale of 0 to 10, how likely are they to recommend the company’s products to a friend. The percentage of detractors who report between a 0 and 6 (unlikely) is subtracted from the percentage of promoters who report a 9 or 10 (very likely) producing a score that varies from -100 to +100. Importantly, several providers have developed robust systems for ascertaining the NPS score of individual touch points along a customer journey. Ideally, these can then even be attributed to specific locations, functions or departments within the company. However, companies often struggle to make a straight-line connection, as an experience in part of a journey can dramatically influence how a customer feels later on down the path.

We’ve yet to see a company with tight input and output relationships defined between activities, empathy and satisfaction. Still, the field of customer centricity metrics continues to evolve as companies get access to ever greater volumes of data.

Better Differentiation, Better Decisions

There is absolutely nothing new in the idea that companies should care about their customers. And while new digital tools can provide some value in understanding what customers think, one shouldn’t confuse that with customer centricity. Real customer centricity happens when an organization fundamentally realigns its strategy to focus on customers and then infuses its decision making with real-world experiences. The results can be astounding. Employees make decisions faster. They act with the courage of their convictions. And they spend time on things that are of greater value to the people paying the bills. Customer centricity is about strategy and culture. The transformation often takes significant time and resources. The results, however, can include an enduring way to compete in an increasingly uncertain world.

Dev Patnaik

CEO

Dev Patnaik is the CEO of Jump Associates, the leading independent strategy and innovation firm. He’s a board member of Conscious Capitalism. Dev has been a trusted advisor to CEOs at some of the world’s most admired companies, including Starbucks, Target, Nike, Universal and Virgin.

Ryan Baum

Partner

Ryan is a partner and advisor to Fortune 500 executives, setting the course for large-scale transformation and aggressive growth. He helped a major airline clarify and roll out a new corporate strategy, partnered with an automotive company to recapture the Millennial market, and helped a technology giant break into the healthcare industry.