Ideas for Leaders #413

How to Be a Customer-intimate Company

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Key Concept

Customer-intimacy is the ultimate customer-centric model, resulting in long-term relationships with the most valuable and profitable customers. It’s not easy to achieve, however. For most businesses, becoming customer-intimate is more of a transformation than a transition. The first step involves a reversal of the normal ‘logic’ of business — and the next a significant organizational change. 

Idea Summary

Around 20 years ago, academics and consultants Michael Treacy and Fred Wiersema identified three ‘value disciplines’ or models followed by top-performing companies: operational excellence, customer-intimacy and product leadership. The second, essentially an advanced form of customer-centricity, is usually the one that’s hardest to emulate.

One of the difficulties with the customer-intimacy model is that it reverses the ‘natural logic’ of business. Customer-intimate companies put people before short-term profits. They see making money as something that ‘happens’, a by-product of service. They take a relational rather than a transactional approach — and this has implications for the way they’re organized and run.

Research by Vlerick Business School has identified a specific set of activities common to most successful customer-intimate businesses. These activities can be grouped under five sets of processes managers must master to make strategy work. The main ones are outlined below.

Direction and goal-setting processes

In the customer-intimate company, the service philosophy starts at the top. Leaders make sure that every employee — whether they face the customer or not — understands the ‘value proposition’. They explain customer-centricity clearly — and they lead by example, listening to customers, talking to and visiting customers, and sometimes taking direct action to solve customers’ problems. They encourage employees to help ‘screen the market’ and report changes in customer behaviour and preferences.

They do not, however, treat all customers equally. Their approach is relational — but also pragmatic. They focus on the 20% of customers who generate 80% of revenue and who are open to a long-term relationship.

Operational processes

Customer-intimate companies manage their internal knowledge base and customer complaint and feedback procedures effectively and they reward customer loyalty. They have processes that create a virtuous circle of knowledge and trust. The more knowledgeable the company, the greater the customer’s faith it will deliver what it promises — and the greater the customer’s faith, the more open they are to dialogue that builds customer-relevant knowledge.

Evaluation and control processes

Customer-intimacy requires metrics. KPIs might include net promoter scores — customers’ willingness to recommend the company to colleagues and friends. Customer-intimate companies will also measure potential ‘customer lifetime value’.

The results of satisfaction and retention measures should be discussed with employees and core customers. This will create opportunities to improve service. 

Satisfaction and retention scores can also be used to help decide bonuses for managers and sales and service staff. Linking them to compensation will confirm customer intimacy at the core of the company.

Support processes

Customer Relationship Management (CRM) is the most obvious supporting tool. There is good CRM and bad CRM, though.

Companies need to make sure their databases are easy to access and regularly updated — and, crucially, that they include customer-specific information as well as transactional data. They will also need to use the data smartly. Customer-intimate companies have guidelines for how many times to contact the customer and through which channels.

Organizational behaviour processes

The organization and its HR policies need to reflect the operating model. Customer-intimate companies:

  • Make ‘attitude towards the customer’ a hiring criterion.
  • Invest in staff training and retention. (High staff turnover is not conducive to long-term relationships.)
  • Create teams or account managers that take responsibility for customer accounts.
  • Give prizes to employees who ‘go the extra mile’ for customers.

Business Application

The activities summarized above align the organization for customer-intimacy and create the context — the collaborative culture — in which employees commit to making customer-intimacy work.

Examples of customer-intimate companies cross industries and sectors. They include the online shoe and clothing retailer Zappos, the Danish bank Jyske Bank, the packaging specialist Tetra Pak and Châteauform, a hotelier specializing in residential seminars. 

They share the same competitive theme and value proposition — customer service and connectivity — and they unite their organization and people around it.

One of their defining characteristics, perhaps, is imagination. A customer-intimate company has the ability to empathize, to imagine what it’s like to be in the customer’s shoes. It listens to the customer — to understand them, not to sell to them. And it’s prepared to think ‘outside the box’. It might, for example, work with other companies to combine knowledge or recommend a solution that includes a competitor if it believes it to be in the best interests of the customer.

A golden rule of customer-intimacy: avoid self-orientation.

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Authors

Institutions

Source

Idea conceived

  • May 2014

Idea posted

  • July 2014

DOI number

10.13007/413

Subject

Real Time Analytics