Seven Deadly Mistakes of Customer Management

After nearly 40 years across nearly 40 countries and having assisted more than 150 of some of the best known organizations in the world, I still continue to see as many as 80% of Fortune 500, FTSE 100 and others WILLINGLY allow millions of dollars. Euros, pounds sterling (or other local currency) in revenue and profit to slip through the “cracks” because of a blatant failure to effectively and efficiently establish and maintain meaningful relationships with the customers they need and want most – full stop!

My purpose in writing this brief article is to put forth what I consider, based upon my experiences, to be the 7 Most Deadly Sins of Customer Management. The challenge? Limiting it to just the “top 7″!

The First Deadly Sin: “Failure of the senior management team to exhibit role model behaviors (or, in other words, “not walking the talk” regarding the customer)
While many senior executives “talk the good talk” regarding the importance of the customer as Sir Fred Goodwin did when Head of Royal Bank of Scotland Group or “how customer focused we are or need to be”, the REALITY is that far too many are either clueless or have limited knowledge of the true requirements they must meet as members of the leadership team or as an organization to become or maintain true customer focus. In this article I will not discuss the cultural issues – the values/beliefs needed to be successful, yet the culture of an organization is like the “soil”. You cannot grow a good crop unless the soil is properly prepared and cultivated/nurtured continuously. The right behaviors are critical – especially from senior executives. Here is one of those critical behaviours/practices:

“Management at the senior level regularly meets with customers (B2B or B2C) to listen and learn about changing requirements/evolving trends/new issues, how their organization is performing in meeting these requirements/sensing the evolving trends or addressing the issues as the customers perceive them and to strengthen relationships with their customers”.

The Second Deadly Sin: “Not Answering the Question: What’s in it for the customer?”
It was Peter Drucker, well known business guru who said that “the purpose of a business is to create a customer”. While I agree with this to a certain extent, I would go a little bit further and say that in my opinion “the purpose of a business is to identify the customer it really wants (not take any warm body with a pulse), attract them and build a long-term relationship with them by consistently delivering an appropriate value proposition”. How many of your Key Business Objectives, if achieved, will provide value to your customers?

The Third Deadly Sin: “Failure to define specific relationship strategies”
It would surprise you how many organizations today still follow a “one size fits all” strategy (one which will doom your organization to abject failure). Such an approach is NOT “strategic”. I call it laziness! I call it “taking the customer for granted”. Most often there is no segmentation analysis by life-style, demographics, attitudes or anything else which could prove valuable to the development of effective relationship strategies (a 7-step process to do it correctly). Not all customers want to be treated the same.

Michael Porter in his HBR article, “What is Strategy” said that there are really only two strategies for any organization. The first is, “Do what everyone else does, but do it better” and the second is, “Follow a strategy that creates and delivers maximum value to your customers”. I subscribe to the latter!

The Fourth Deadly Sin: “A failure to understand your customers to the appropriate depth and breadth and to add value”
There are 3 levels of understanding which an organization must have regarding their customers. The first level is what I will call “basic needs”. These are the things which customers expect to be routinely perfect like accurate invoices. Know that failure on a routine basis to deliver these “basics” almost flawlessly will lead to a defection.

The second level is “wishes”.EVERY customer has a “wish list” as McDonnell-Douglas did during the development of their successful C-17 military cargo plane. Conducting in-depth interviews and focus groups – not just surveys is the best way to start. These are sources of differentiation and represent what the customer really would like you to do.

Then there is “value”. To me, “value” should be defined as “any tangible or intangible benefit which the customer perceives the competition is either unwilling or unable to provide”. As such, “value” provides an immediate source of differentiation and competitive advantage. There are 8 sources of value (1) Image/reputation/brand strength (the source of a “feel good” feeling); (2) business process ((a) ease of doing business; (b) cycle time or responsiveness; (3) people (competency, proactivity, attitude of service); (4)-(5) the range of product and services (and the degree innovation recognized in them by the customer – there are 8 sources of innovation); (6) technology – an enabler such as ensuring user friendliness; (7) support (being there whenever the customer needs you; effective and efficient problem/complaint management (and prevention); never leaving the customer in a state of uncertainty); (8) information – easily accessible, timely, accurate and complete – transparency. The unfortunate thing is that most organizations focus attention on only 2, possibly 3 of these sources (product, service, and technology) and do not do that good a job with them!

But “How do you assess if you are adding value to customers?” First, you must recognize that when a customer comes to do business with your organization they incur two (2) costs. The first is the obvious one – the “economic cost” – what the customer must pay to get the product, service or support they desire from your organization. The second and even more important one is the “emotional cost” or how much “pain” the customer must endure to obtain the product, service or support they desire.

The Fifth Deadly Sin: “A failure to understand and improve the customer engagement system”
It never ceases to amaze me how little management in general, and senior management in particular, know about customer engagement – that array of integrated processes which represent where and how the customer and your organization interact to conduct business. And improve it? That’s on my wish list!

Here is an example of an engagement system from Motorola Telecommunications as it once was. What are the facts? Once the customer has decided to purchase a telecommunication system (presuming a timely, complete and innovative sales (proposal), the system must be designed, built, delivered, installed, customer personnel trained as well as on-going maintenance and technical support provided. There are, of course, the more mundane activities of credit approval, invoicing and other account maintenance activities of an administrative nature. The point is that when the customer comes to their next purchase decision, they will base their interest on choosing Motorola again based upon their combined experiences across all these customer engagement processes. You need to know which of these engagement processes are most critical to the relationship, why they are so important and monitor them closely as some are more important than others.

Customer services

The Sixth Deadly Sin: “Having dysfunctional or underutilised sensing processes”
In any organization there should be three (3) external customer “sensing processes” which are most critical to survival (please note that relying on only one (1) source of external customer feedback is like being a Puffer Fish tester or playing Russian Roulette). These three are (1) your customer satisfaction/loyalty measurement and management system (emphasis on loyalty and on management); (2) your complaint management process; and (3) your customer service/contact centre. Sure there are others – either direct or indirect like customer visits and more. It is critical that qualitative approaches such as performing in-depth interviews of key customer decision makers, decision influencers and users as well as focus groups – powerful techniques which result in rich, value laden and actionable information be utilized.

The above points are ones you need to internalize if you have any hope of building a “secure” customer base made up of those customers you really want and who would not leave you even under the penalty of death! Remember, the worst relationship you can have with customers is one in which they are “indifferent” about their relationship with your organization. These are the customers who use any port in a storm. They are driven generally by two demons: price and availability.

The Seventh Deadly Sin: “A failure to establish an integrated information architecture, infrastructure and use systematic approaches”
While an integrated information architecture is a critical success factor for enabling your organization to be agile the fact is that in most organizations the data/information they need most for rapid and successful market response is very fragmented – literally islands of data/information” which cannot be connected or cross-compared.

In addition, systematic approaches – ones which are the opposite of informal, ad hoc, inconsistent approaches seem to be pervasive in many organizations. The best way to illustrate is with Dr. Edward Deming’s improvement cycle – which is the path to a systematic approach. His cycle consists of 4 elements: plan, do, measure (check) and improve (act). As a part of daily work life – as a part of your unconscious competence (see Peter Senge’s “Learning Organization”) you should follow this cycle in ALL you do

Conclusion:
By way of summary and without a lot of explanation, I leave you with a picture of what you would see if you looked into the internal workings of a truly customer focused organization – a “cut away drawing” so to speak. It illustrates all the issues laid out in the above article.

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