Notes

[MUSIC]
Now that we understand what product
centricity is all about
and we've discussed some of the cracks in
product centricity.
And even some of the opportunities from
companies to escape from and maybe
do better than a product-centric approach,
I
want to start moving away towards customer
centricity.
But before I give you a definition and
talk it through, I'd like
you to think about what customer
centricity
means, based on your experience as well
as what I've discussed so far.
So in order to do that, I want to work
with a series of examples here.
In fact, on this slide, you'll see the
names of four very famous retailers.
Three of them operate on a global level,
so Walmart, Apple, Starbucks.
I'm sure most of you are familiar with
them.
And Nordstroms.
A high end very, a high touch department
store chain
here in the US.
If you're not familiar with them not a big
deal.
I think you'll appreciate the story
anyway.
What I'd like you to do is take a moment,
and from your experience with, your
perceptions of these firms, decide which
of them would be highly customer centric.
So I want you to think about what customer
centricity means in light of our
discussion so far.
And decide which of these, could be one,
could be all, could be none, up to you,
would be above the bar in terms of
customer centricity.
So think about what customer centricity
means, and
which of these firms qualify in that
regard.
Think about that for a second.
And then I want to talk through all four
of them.
In my book, none of these firms are truly
customer centric.
Now, I want to be careful about this.
I have great admiration
for all these firms.
I'm a big customer of all of them.
I really like what they do.
But all of them for different reasons.
Fail to be truly customer centric, nearly
as much as perhaps some of you thought
when in deciding which of them, which
of these firms are or aren't customer
centric.
So I'm just going to take a few moments to
talk through each
one of them, and then, finally we'll bring
up our definitions of customer centricity.
First there's Walmart.
Now again, Walmart is a terrific firm, but
Walmart
knows, surprisingly little about any one
of it's customers.
Unlike Harris, unlike Tesco, unlike so
many other retailers
out there, Walmart does not have a loyalty
program.
Walmart has made very little effort to
date to
try to figure out exactly what each
customer's doing.
And how they can influence each customer's
behavior.
So while Walmart might not make a lot of
efforts to understand what any
one customer's going to buy, they make
great
efforts to understand the customers as a
whole.
They understand regional differences.
They understand when certain kinds of
events occur.
For instance, when a hurricane is about to
hit the south eastern US,
they need to fill the stores with water
and batteries and so on.
So they understand the customer in a
generic way but they make very little
effort
to understand the customers in a very
specific
granular way as a direct marketer would
suggest.
And you know what, that doesn’t bother me
because Walmart isn’t intending to be a
direct marketer.
If you think about the Walmart business
model, it’s about
selling in great volumes, it’s about
bringing the costs way down.
So, in many ways, Walmart is
a prototypical, and a wonderfully
successful, product-centric
firm.
Let's come up with products that we can
sell a
whole lot of, that's going to let us bring
our costs down.
And let's figure out ways to extend our
product goodness, and,
and all the aspects that I mentioned for
product-centricity apply to Walmart.
So in many ways, I, I excuse them.
I allow them to focus on product
centricity because they're so good at it.
There are a very few firms in the
world that can operate in an operationally
excellent
manner as well as Walmart can.
It's a similar but different story for
Apple.
because Apple again, is the classic
performance superiority firm.
They don't spend a whole lot of time doing
market research, to figure out exactly
what the customer wants.
They don't spend a whole lot of time
focusing on segmentation and real granular
analysis to try to predict what any one
customer is going to do over time.
What Apple focuses
on, is leveraging its product expertise.
Is taking the kinds of products that
they've already developed, and
figuring out what are the next ones that
they should develop.
So again, a classic example of product
centricity, and they do it better than
most company, most other companies on the
planet, and they can get away with it.
Now, Walmart and Apple, for the most
part are focusing on doing product-centric
things.
Operational excellent for Walmart,
performance superiority
for Apple.
They are doing some smart things at
the margin to understand their customers
better.
For instance, Walmart is spending a little
bit
more time developing technology that's not
only going to
help them learn about their customers, but
be
even more operationally efficient than
they were before.
So, for instance, here in the U.S. They
have a new
program they call Scan & Go, a mobile app
that lets people
scan products as they move around the
store so as
they check out, the whole scanning process
happens much faster.
It's a brilliant idea that lets them be
more operationally excellent, but
also lets lets them start tagging
individual customers and tracking them
over time.
So they're starting to take on some more
customer centric initiatives without
sacrificing the operational excellence.
And
Apple is also starting to do a number of
things.
Again, small initiatives not driving the
business that are
letting them understand their customers a
little bit better.
Whether it's tracking peoples music
preferences through iTunes.
Or some of the activities that they do in
the Apple retail stores.
Slowly but surely, they're starting to
develop a better
understanding of their customers at a more
granular level.
And who knows?
One day, if and when competition catches
up and Apple can no longer be the product
leader that they are, they
could probably turn around and start to be
a great customer-centric firm as well.
But today, it's not quite as mission
critical as it is for other firms.
The third company on our list, Starbucks,
is a very interesting contradiction.
At a local level, Starbucks or any coffee
retailer, is very, very customer centric.
The Barista,
the person on the the other side of the
counter, the person who
makes your coffee, knows a lot about you
if you're a regular customer.
Not only does he or she understand your
coffee preferences and what other items
you might buy in that store but
just through the casual conversations you
have with
them, they might know what movies you
like, what kind of clothing you’d like
to buy, something about your job, your
family and they often make recommendations
to you.
That are going to make your life
better even if Starbucks itself isn't
making a penny off of those
recommendations.
That is customer centricity.
Okay, being a trusted advisor to the
really good customers,
finding ways to lock that customer in and
so on.
So, the paradox is, while Starbucks is
very customer centric at a
local level, they are not that customer
centric at a national level.
You take your Starbucks loyality card, and
you bring it a Starbucks in another
city or another country and show it to
them and say,
I'd like the usual please, they have no
idea who you are.
So not only can they not meet your
immediate
needs, but it's hard for them to be a
trusted advisor and to make other
recommendations to you
when they have no idea about anything
about your history.
So to me, that's a really key point.
It's not enough for a company to be
customer centric
some of the time when they know who you
are.
But a truly customer centric company will
identify you and will be able to
value you and make recommendations no
matter
what kinds of interactions you have with
them.
Whether you go from store to store,
whether you go online or offline.
That's what customer centricity is all
about.
Now Starbucks to their credit recognizes
this.
And they're coming up with all kinds of
interesting technologies
that are going to let them collect and
integrate your data across
stores and across other touch points you
have with them.
They recognize that the opportunities and
the
necessity for customer centricity is at
least
as important as it is to come up with the
next great coffee flavor.
So again, it's that balance between
focusing on the product and focus,
focusing on the customer that so many
companies are now struggling with.
And finally, there's Nordstrom's.
And while that might be the least familiar
company on the list, especially to those
of you outside the US, it might be the
most interesting
example to help us understand what
customer centricity really is and isn't.
But whether you've shopped at a Nordstrom
store or not, you might be familiar with
the story that makes Nordstrom so
supposedly customer-centric or not.
And here's the way it goes.
Nordstrom's a high end department store.
They sell clothing, shoes, and so on.
One thing they don't sell is tires.
Yet, one day someone walked in to a
Nordstrom store.
Supposedly in Fairbanks Alaska, and wanted
to return a set
of tires that obviously they could not
have bought at Nordstrom's.
Perhaps there was a tire store at that
location before Nordstrom's opened shop.
And Nordstrom's being so incredibly
customer centric, gave them the
money back for tires that they didn't buy
at Nordstrom's.
Now is that customer-centricity or what?
I like
to say, or what.
If you think about it for a minute, is
that really customer-centric or is it
actually kind of stupid?
Does it make sense to give someone money
back for
a product that they couldn't possibly have
bought from you?
For me, I say, most of the time it's
probably a bad idea to do that.
And the question is, under what
circumstances would
it be a good idea to do that?
Think about that for a second.
When would it make sense to give someone
money back
for a product that they couldn't have
possibly bought from you?
When would it make sense?
And here's the answer.
If that customer is incredibly valuable to
you, and I'm talking about future value,
I'm talking about the fact that we expect
this customer to be buying so
much from us in the future that if we
don't give them money back
for the tires that they thought they
bought from us, if we don't give them
the money back today, we're going to lose
that value.
If that's the case.
We'll happily give you the money back for
the tires that you didn't buy.
Maybe we'll double the money back.
Who knows.
So it all depends on the value of the
customer.
The future value.
The lifetime value of the customer.
If that's sufficiently high.
Then we'll roll out the red carpet for
you.
And if it's not.
And for most customers it wouldn't be.
Then we would politely decline.
We might still be nice to you, of course,
but we're not
going to give you money back if we don't
see the value in it.
And that's the problem with Nordstrom's.
Nordstrom's offers such wonderful service.
They treat everybody so incredibly well.
Regardless of the value of that customer.
And that's the problem with Nordstrom's,
is that because
they fail to focus on figuring out the
future value
of each and every customer, they're just
going to treat everybody really well.
And there's a lot to be said for that,
it's a wonderful company.
I like knowing that when I go in there I'm
going to be treated really well.
But I think that they're missing some
opportunities
by picking and choosing a little bit more.
In the old days it was impossible to
do that, but today Nordstrom's, like every
other retailer,
has the capability to collect the data and
use
technology to do a little bit more
targeting and
a little bit more selection to figure out
who is worth the extra special treatment.
And who, doesn't necessarily deserve it.
So to me the Nordstrom's example is a
great
example of, of where a product and
customer centricity collide.
And what I want to do now is, is
to start focusing more on what customer
centricity really means.
And that's what we're going to do next.
[MUSIC]