Chapter Twenty Eight

What is customer centricity?

Walmart, Apple, Starbucks and Nordstrom, are four well-known, successful companies. You might be surprised but none of these firms are truly customer centric. Each of them fails to be truly customer centric. Walmart is a terrific firm but knows surprisingly little about any one of it's customers. Unlike Harris, Tesco, and countless other retailers, Walmart does not have a loyalty program. Walmart has made very little effort to date to try to figure out exactly what each customer is doing and how they can influence each customer's behavior. While Walmart makes little effort to understand what any one customer is going to buy, they make great efforts to understand the customer as a whole. They understand regional differences and respond quickly to purchasing trends. For example, when a hurricane is about to hit the South Eastern United States, Walmart will fill the stores with water and batteries.

They understand the customer in a generic way but they make very little effort to understand the customers in a specific granular way as a direct marketer would suggest. Walmart isn’t intending to be a direct marketer. The Walmart business model is about selling in great volumes and bringing the costs way down. So in many ways, Walmart is a prototypical, and a wonderfully successful, product-centric firm. They come up with products that they can sell a lot of, and that will let them bring their costs down, and figure out ways to extend their product goodness. There are very few firms in the world that operate with such strong operational excellence as Walmart. On a similar note, Apple Inc. is a market leader in performance superiority. They don't spend a whole lot of time conducting market research to figure out exactly what the customer wants. It's really hard to design products by focus groups. A lot of times people don't know what they want until you show it to them. Walmart doesn'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.

“Apple focuses on leveraging its product expertise by taking the kinds of products that they have already developed and figuring out which ones are going to be developed next. This is a classic example of product centricity and they do it better than most companies on the planet. Steve Jobs listened to customers to find out which specific problems they faced and to identify the biggest points of friction they had. He did not listen to customers' proposed solutions because his belief was that the best, most innovative solution had to come from the company. Customers might help identify the destination, but you can't listen to them on how to get there.” Gregory Ciotti; a marketing strategist at Help Scout.

Because companies understand it is not the customers' job to tell them how to solve their problem, they rely on feedback to help identify problems that actually exist. Walmart and Apple rely on a product-centric focus strategy. Operational excellent for Walmart, performance superiority for Apple. To recognize the needs of their customers, both are implementing additional programs at the margin. For instance, Walmart has invested time and resources to develop technology that will help them ascertain the needs of their customers. This technology will enable them to be even more operationally efficient than they were before. For instance, in America they have implemented a new program called Scan & Go, a mobile app that permits customers to scan products as they move about the store and when they approach the check-out line their whole check-out process happens much more efficiently. This brilliant concept allows Walmart be more operationally excellent as it affords them the opportunity to start tagging individual customers and tracking them over time. Without sacrificing the operational excellence, Walmart has begun to utilize more customer-centric initiatives.

Apple has also begun to incorporate a number of small initiatives that are enabling them to understand their customers a little bit better. Whether tracking music preferences through iTunes or monitoring purchase activity conducted in the Apple retail stores, slowly Apple is steadily securing a better understanding of their customers at a more granular level. Much can be learned about the customer from their music purchasing habits on iTunes and their streaming service Apple Music and Apple News.

Someday in the future, if the competition catches up with them and Apple is no longer deemed the product leader, they could probably turn around and aspire to be a superb customer-centric firm. But today, it is not quite as mission critical as it is for other firms.

Starbucks, the third company on our list, represents an interesting contradiction. At the local level, Starbucks or any coffee retailer, is very customer-centric. The Barista, the person on the other side of the counter who makes your coffee, seeks to know a lot about you if you are a regular customer. Not only does he or she record your coffee preferences and what other items you might buy in that store, but just through casual conversations, they seek to gain additional insight. They may discover movie and clothing preferences, they may learn something about your job, your family and they will use that information to make specific recommendations for you. This is an effort to make your life better even if Starbucks does not make a penny off of those recommendations. A prime example of customer-centricity includes being a trusted advisor to the really good customers and finding ways to assure that customer is locked in. The paradox here is while Starbucks is very customer-centric at a local level, they are not customer-centric at a national level.

Currently, Starbucks loyalty cards are solely indigenous to the surrounding area of where they were acquired. Using the Starbucks loyalty card in another city or another country will not work the same as the local Starbucks. Because of the inadequate technology regarding the loyalty cards, Starbucks is unable to discern previous purchase history or meet immediate needs. This prevents them from building strong relationships and serving as trusted advisors as they are unable to make recommendations without any knowledge of previous purchase history. Operating as customer-centric some of the time limits a company's ability to value the customer and provide stellar customer service. This is what customer-centricity is all about and Starbucks to their credit recognizes this. At the present time, Starbucks is developing interesting technologies that will enable them to collect and integrate customer data across stores and other touch points their customers have with them. Starbucks recognizes that the opportunities and necessity for customer-centricity is at least as important as inventing the next great coffee flavor. Maintaining a balance between concentrating on the product and concentrating on the customer is one concept that so many companies struggle with.

Photo of the Nordstrom store at the Somerset Mall

The final company is Nordstrom. And while they might be the least familiar company on the list, especially to those of you outside the United States, it might be the most interesting example to help us understand what customer centricity really is and is not. Whether you have shopped at a Nordstrom store or not, you might be familiar with the story that defines Nordstrom's reputation as customer-centric. Nordstrom's is known as a high end department store. They sell clothing, shoes, accessories, jewelry and more. One item they do not sell is tires. Yet, one day someone walked into a Nordstrom store, 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. Nordstrom's being so incredibly customer centric, gave them the money back for tires that they didn't buy at Nordstrom's.
Does it make sense to give someone money back for a product that they couldn't possibly have bought from you? Most of the time it is probably a bad idea. But, under what circumstances might it be a good idea? When would it make sense to give someone money back for a product that they couldn't possibly have bought from you? The answer is if that customer is incredibly valuable to you, and the fact that you would expect this customer to be buying so much more in the future, if we don't give them money back for the tires that they thought they allegedly bought from us, we're going to lose that value. If that is the case then we will happily give you the money back for the tires that you didn't buy.
Another Nordstrom customer experience written by Micah Solomon in Forbes, Mr. Solomon provides this highly illustrative story: “For example, do you know who’s legally responsible if a common carrier leaves your Nordstrom delivery in the rain and your $200 shoes are ruined? Well, the responsibly party might be you or it might be the trucking company, but it’s absolutely not Nordstrom. Yet, when this happened to me, not for an instant did my salesperson consider saying 'You need to file a claim with the trucking company.'” The example ends with a pleasant and quick solution for Mr. Solomon: “ She instead told me, without hesitation, the following: 'I’m so incredibly sorry that happened, and I’m bringing over a brand new pair of shoes–will you be home in forty-five minutes?'”
The retailer’s handbook has been streamlined to the company’s “One Rule: Use good judgment in all situations.” Nordstrom is focused on hiring nice, capable people whose judgment can be trusted to represent the company. They provide favorable salaries and working conditions.
It all depends on the future value of the customer and the lifetime value of the customer. If that value is sufficiently high then we will roll out the red carpet. And if it's not of value and for most customers it wouldn't be, then we would politely decline. You are not going to give you money back if you don't see the value in it. But that is not the case at Nordstrom. Nordstrom offers wonderful customer service. They treat everybody incredibly well. Regardless of the value a customer Nordstrom does not focus on figuring out the future value of each and every customer, they're just going to treat everybody really well. But today Nordstrom, 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 extra special treatment, and who doesn't necessarily deserve it. Nordstrom is a great example of where a product and customer centricity collide.
How do you move to a customer-centric focus? One way is to embrace “design thinking.” Developed by IDEO founder David Kelley, design thinking is defined as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success. It is accepted that businesses, projects, or teams that lack customer focus are bound to fail. Design thinking makes the customer the main focal point of design for any solution. Plus, it consistently applies the values embraced by this approach, such as empathy, diversity, and ambiguity, as well as recognizing the importance of multidisciplinary teams. Many of these principles reflect ideas that stem from well-known principles and/or best practices. However, design thinking, in essence, incorporates them into a coherent and repeatable process.” Retrieved from Forbes article by Kaan Turnalli.
There are three great design themes: making something beautiful, making something easier, and making something possible. The best designs accomplish all three at once. A successful product and business will continually improve customers’ lives. As customers use your product to make their lives better, they will face new challenges and desire new goals and outcomes.
By studying the customer's journey and using empathy you open up nerve endings so you can feel what it is like to be in another’s shoes—a prerequisite for customer-centric design. You need to get as frustrated as the users/customers so you can better understand the pain points.

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