The Problem With Customer-Centricity

A 2007 CMO Council survey asked 477 B2B IT users to rate their technology vendors, and, apparently, surveyed the vendors as well. The study found that 56% of vendors perceived themselves to be extremely customer-centric. Only 12% of their customers agreed, however.

That’s a big gap. One group must be wrong, right?

Not necessarily.

Of all the marketing lingo and jargon, there’s probably no term so poorly-defined yet frequently used.

I mean, really, what exactly is customer-centricity?

I’m sure it’s something I want to be, and sure it’s something that if I am it, then I must be satisfying my customers, improving my NPS score, and driving up my profits, right? Right?

But what is it? How do you define it? If you buy into the notion that “if you can’t measure it, you can’t manage it”, then, how do you measure it?

Your guess is as good as mine. Or, to be more precise, your lame and feeble answers to those questions is probably just slighter better than my lame and feeble answers to those questions.

So it’s entirely possible that both the IT vendors and their customers were completely right in their assessment of who’s customer-centric. They could be using different definitions of the term.

I googled “customer centric definition” and found some entries:

“An approach to doing business in which a company focuses on creating a positive consumer experience at the point of sale and post-sale. A customer-centric approach can add value to a company by differentiating themselves from competitors who do not offer the same experience.” http://www.businessdictionary.com/definition/customer-centric.html

“Placing the customer at the center of a company’s marketing effort, focusing on customers rather than sales.” http://dictionary.reference.com/browse/customer-centric

“Being Customer Centric is about an ability for everyone in the company to continuously learn about Customers and the market. It is also the responsibility of everyone in the company to respond appropriately to what we learn.” http://www.businessinberkshire.co.uk/threestep/news2.html

Hmm. Those don’t quite do it for me. After all, a firm could “focus” on “creating a positive customer experience” but if it fails to do so, would it qualify as customer-centric? In addition, any firm can claim to focus on customers rather than sales — how would we know if they really do or not? And, c’mon now, there are plenty of companies that strive to “learn about customers and the market”, and then take those learnings to stick it to customers.

I also found some hoo-ha about the “6C’s of customer-centric DNA” which shouldn’t be confused with the “6 laws of customer experience excellence.” Neither of which deserves links provided here.

The best attempt I’ve seen to define — measure, would be a better word to use here — customer-centricity comes from Carlos Dunlap from Kobie Marketing. In the November 2010 issue of Loyalty Management magazine, Carlos outlines a framework with four dimensions  — organizational readiness, data, IT support, and analytics — that helps companies calculate a score to determine how customer-centric they really are.

It’s a good approach, and definitely worth evaluating your company on.

But I think it misses a simple point: Being customer-centric means making decisions that benefit your customers, potentially at the expense of your firm’s short-term profitability. Emphasis on potentially and short-term.

If your company can’t point to a systemic history of making decisions that puts customer satisfaction and customer benefit ahead of firm’s short-term profitability — that is, making decisions with the belief that it will improve customer loyalty and retention in the long run — then I, your humble blogger, refuse to believe that your company is customer-centric.

Is being customer-centric better, then, than customer-uncentric? You can’t unequivocally say “yes.” Many of us might prefer to work for firms that are truly customer-centric because that’s what we’re more comfortable with. But what if you could make a million dollars this year working for a firm that is customer-uncentric but only $50k for a customer-centric firm, would you do it? Not an easy decision.

Here’s the bottom line: All this talk of customer-centricity is an utter and complete waste of time. The term means nothing. There’s no common definition, no definitive way to measure it, and therefore, no real proof that a company that claims to be customer-centric is any better (for any of the stakeholders) than any other firm.

If your goal is to make your company become more customer-centric, you’ve defined your goal incorrectly.

19 thoughts on “The Problem With Customer-Centricity

  1. Ron, I can’t speak to the definition of “customer-centric,” but I can share that my experience in banking has been that when a bank or credit union says “we are customer/member-centric,” often what it really means is “we are a commodity like every other bank or credit union, so we have to be SUPER nice to our customers/members and keep them happy so they don’t go anywhere else.” That’s a crude statement, but an honest one. I agree with your post, and especially your final line that if you’ve defined your goal as “to be more customer-centric” it’s wrongly defined. I agree. What I believe to be a more important strategic goal (although I realize to you this also will lack a concrete definition) is to “create a company/service/product that adds so much unique value (ie is not a commodity) that we don’t have to kiss up to customers/members because there is nobody else who can do what we do.”

  2. Jeff: Your redefinition of the goal works just fine. Lacking a “concrete definition” isn’t the problem — being unable to definitively say whether or not the goal has been accomplished is the problem. I don’t think that proving that your firm isn’t a commodity (i.e. provides unique value) is necessarily easy, but at a firm’s management team can discuss it and argue it out. There’s no there there with customer-centricity.

  3. Hi Ron, You can find an online version of the November 2010 issue of Loyalty Management magazine here:

  4. Hi Ron,

    I found my way to your blog via the ever-thoughtful and smart Valeria Maltoni (Conversation Agent). It’s nice to meet you!

    As a proponent of customer-centricity for the past 15+ years, I could not help but jump into this conversation since it is at the heart of what I practice and believe as a marketer.

    The problem with your premise, no offense, is that customer-centricity has not been properly defined (Business in Berkshire is probably the closest definition) nor has the origin of the theory (which is integrated marketing communications circa 1994) been shared.

    In 1994, Schultz, Tannebaum, and Lauterborn defined what it meant to be integrated and customer-centric with their book “The New Marketing Paradigm.” The paradigm shift they were talking about at the time was removing internal silos and marketing from a customer perspective, including two-way communications (It’s taken all of these years and the advent of social media for most companies to start to get this concept…and most still don’t.)

    As with most things (especially social media), people want to take defined terms and re-define them for their own motives, exposure and profit. The same is happening with “customer-centric.” I haven’t seen the term used in 10 years or more and now it’s “hot” because of social media, which is leading to the term being misused and misunderstood.

    Since customer-centric has its roots in IMC, here’s the correct definition:

    “Using outside-in thinking, Integrated Marketing Communications is a data-driven, customer-centric approach that focuses on identifying consumer insights and developing a strategy with the right (online and offline combination) channels to forge a stronger brand-consumer relationship. This involves knowing the right touch points to use to reach consumers and understanding how and where they consume different types of media. Regression analysis and customer lifetime value are key data elements in this approach.”

    [The key here is that being customer-centric “marketing” relies heavily on data, two-way communications, and outside-in planning.]

    However, customer-centricity is an operational theory, not a marketing one. A customer-centric organization puts the customer in the middle of their organization with ALL departments serving the customer versus a top-down (leading with the CEO) hierarchical model that most organizations use.

    The Four C’s (Customer, Convenience, Cost, & Communications) replace the marketing mix (which is solely organizationally focused) with a point of view that is customer-centric. Therefore, from an operational perspective, nothing is built without it meeting the needs/wants of the customer at a cost, convenience to buy and communications that are acceptable to the customer.

    As you said, loyalty is born of companies being customer-centric. But the reality is that 95% of companies today are NOT truly customer-centric. That’s why they lose up to 50% of their customers every 5 years, which turns them into marketing machines versus companies that understand their markets.

    Oh, and yes, all of this IS measurable. Well, only if planned properly (but that’s a marketing failure to discuss another day). 😉

    “What is Customer-Centricity” & “Creating a Customer-Centric Business” by Ranjay Gulati:


    I could prattle on, but would rather provide resources…

    IMC: The Next Generation (Schultz & Schultz)
    Reorganize for Resilience: Putting Customers at the Center of Your Business (Gulati)
    Turnaround Strategies for Customer-Centric Operations (Roman)
    Building the Customer-Centric Enterprise (Imhoff, Loftis, Geiger)
    Building Customer-Brand Relationships (Schultz, Barnes, Schultz, Azzaro)
    Strategy from the Outside In: Profiting from Customer Value (Day. Moorman)
    Customer Culture: How FedEx and Other Great Companies Put the Customer First Every Day (Basch)

    In a nutshell, customer-centricity work does mean something, there is proof (Gulati’s book is chock full of it), it does work and it is measurable. However, it is rare because it’s been misunderstood and it’s a lot of work to turn a company around.

    Let’s keep this conversation going…we wouldn’t want marketing hacks out there slinging around the term customer-centric and giving it a bad name. 🙂

    Cheers,
    Beth Harte
    http://www.theharteofmarketing.com
    @bethharte

  5. Beth: Sorry for my slow reply back, and thank you for taking the time and energy to write your comment. I think at one level we probably agree on at least one thing: That being truly customer-centric is a good thing. I’ve written a lot about “customer advocacy” which I define differently than the Net Promoter Score gurus do. To me, advocacy is “doing what’s right for the customer, and not just your own bottom line.” I’ve also done research to show what advocacy is from a more detailed operational perspective. I could argue that being “customer-centric” and being perceived as a “customer advocate” and similar.

    But the problem we both face here is that we get into a situation of having to fight for our “definitions.” You may be right that Schultz, Tannebaum, and Lauterborn “defined” customer-centricity in 1994, but if no one in 2011 buys into (let alone knows about) that definition, then it’s questionable whether or not their definition is the definitive definition.

    There is something else I might quibble with you on, specifically your statement “The Four C’s (Customer, Convenience, Cost, & Communications) replace the marketing mix (which is solely organizationally focused).” My view is probably more narrow than yours, as I work primarily with financial services companies, but I see little evidence that the traditional marketing mix (Kotler’s 4 Cs) are systematically used to guide marketing budgeting and investing. Feels more like a free-for-all between competing departments to me.

    I think my view is best summed by this: I think Marketing as a discipline is a mess right now. Too many competing “theories”, “philosophies”, “methodologies”, etc. It’s like a religious war (https://marketingroi.wordpress.com/2007/07/20/management-religion-versus-management-science/). Every side believes what they want to believe.

  6. Great posts on another thought provoking topic. One bad experience that a customer has with a company can seemingly override nine other positive interactions and could lead to the negative feedback (referencing your %’s in your post). I have seen too many “lazy” surveys that don’t clearly articulate what the company is trying to measure. Clients aren’t necessarily interested in participating in focus group types of feedback but to me it seems that tools in place are often presented in an incorrect context creating confusion wth measuring “satisfaction” of a “customer centric” organization. Retention and growth (to me) are a great measure of if an organization is focused on the needs of the customer.

  7. Hi Ron,
    I am happy to keep this conversation going, so thanks for sharing your additional thoughts and insights.

    I would agree that customer advocacy and customer-centric are similar, but would posit that being a customer-advocate is someone who is the voice of the customer internally whereas being customer-centric means bringing the customer literally into the operations. That said, we both know that most organizations are not customer-centric and it’s a completely foreign concept for most. Customer-advocacy is a great first step to getting there (and I’d think still a challenge for most).

    I agree that most business executives and marketers don’t know the sources or definition that I have mentioned; however, as a marketer that has practiced IMC, I tend to agree with an academic viewpoint any day over a marketer trying to make a name for themselves. Why? Because most marketers don’t have an education in marketing and therefore I find it hard to swallow their premise when they haven’t even practiced or argued away original theory… well that, and because I am in academia part-time. 😉

    It’s a shame that organizations don’t successfully use the marketing mix, let alone something like the 4 C’s (which force an entirely “outside-in” viewpoint before delving into the process of the 4 P’s), isn’t it? That goes back to my point above about marketers and a lack of theoretical understanding. Engineers creating products because they want to go down in history, CFOs driving marketing campaigns, Legal canning customer outreach, and marketers spraying and praying because sales is beating them up for leads, etc. I’ve seen it all.

    Marketing is a mess. I’ve blogged in the past that a marketers career sort of goes like this: Professor’s agenda; Hiring Manager’s Agenda; Their Own Agenda. Unfortunately, along that path the customer is never part of the agenda.

    Enjoy your week!
    Beth

  8. I found this refreshing blog, post, and discussion via Beth Harte on Twitter.

    Let us not forget that in the case of publicly traded companies, we have the Shareholders’ Agenda, in the alleged interest of whom many corporate leaders make decisions for short-term gain at the expense of customers in the immediate and long terms. This scenario is something, alas, I doubt any ideal customer-centric theory and practice can remedy.

  9. Constance: Thanks for commenting. I do agree with you that it’s hard (if not impossible) for any ideal customer-centric theory to remedy to problem of conflicting priorities stakeholders.

    But there is a common habit management teams fall into that sometimes make it possible to adopt something like customer-centricity: 1) Results suck. 2) Management goes in search of a solution. 3) CEO falls in love with some new management “idea” (i.e., customer-centricity). 4) Management team brings in management idea guru as consultant. 5) Company becomes a disciple of, and converts to, the religion of the new management idea.

    Step 6, of course, is: Results deteriorate at some point, and cycle starts all over again. 🙂

  10. One point Beth Harte made that I would like to pick up on is that “that most business executives and marketers don’t know the sources or definition that I have mentioned”.

    This may be a stretch but…many fields, not just marketing, are affected by what recent graduates expect.

    How does this relate? Well, a study just released yesterday on sustainability shows that potential job candidates actively seek out sustainability reports on companies to inform their employment decisions. Is it possible that a wave of MBAs schooled on the concept of corporate sustainability is now impacting the growth in sustainability reporting? And practice?

    One promising way to impact customer-centric practice may be changing the curriculum of our of business school programs, and not just in the marketing track. I wonder, though, why the term “customer-centric” has fallen into disuse in academia, as Beth notes. Was it just like so many other concepts, gone the way of TQM? A shift in research funding priorities? Could the next generation of fresh talent impact what companies say and do about the customer?

  11. I teach IMC, and the first thing I do is show my students how the 4C’s “replacement” for the 4P’s is pure hogwash. (See my post “Marketing Mix-Up: Being Treated Like Lois Lane” http://bit.ly/iaBCNa )

    “Customer centricity” is not as dubious, but it needs to be severely questioned. First of all, you need to ask, “which customers,” since not all customers are created equal, and some are bad for business. Do you really want to focus your organization on the needs of a problem client?

    Customers also don’t know what they want, they disagree with each other, and are unreliable sources of innovative ideas, so if you focus on their needs, you might get left behind by a company that’s product centric. (Apple, for example, disdains consumer research, while Dell is extolled as a “customer centric” company. Anyone check their market caps lately?)

    If you have two companies that serve the exact same customer or customer base (such as in luxury cars), then being “customer centric” means you’ll be duplicating each other. The resulting lack of differentiation can lead to a price war. In such a case, it’s better to be “competitor centric.”

    Another problem if you’re customer centric: you’re in trouble if that customer ever decides to leave you, since you’ve structured your systems and even trained your employees to serve that customer. (Think ad agencies and their clients.) If one of your customer-centric employees leaves, your customer might go with them.

    Finally, highly talented, artistic employees (such as chefs, creative directors, fashion designers, even computer programmers) may leave if they’re compelled to serve the whims of a customer instead of being allowed to practice their craft. Granted, a company doesn’t want its talent to be self-indulgent, but it doesn’t want to sell them out, either.

    Customer-centricity works best for complex, high-margin projects that entail a great deal of customization over a long period, such as building IT systems, skyscrapers or aircraft carriers. Ultimately, it’s just one of many options for structuring a company.

  12. Hi Freddy,

    I am curious as to if you teach Schultz’s IMC?

    The 4 C’s are a precursor to the 4Ps, which are antiquated and live in a sales-centric, mass marketing world. A world that no longer exists. The one thing as a marketer professor that I always teach is “know thy audience.” Why? Because the “if we build it they will come” philosophy doesn’t work. If you know what customers wants/needs (and values!) you can then create products that satisfy. If you know what cost they will bear, you can then create a price point that will resonate. Etc.

    The one example of luxury cars and being customer-centric that you share is interesting. We could say that Mercedes and Lexus target the same market, right? Here’s the difference, everyone knows that Lexus has much better after-sale care than Mercedes. And that’s what makes them more customer-centric and differentiates them in the marketplace.

    Also the Apple vs. Dell example isn’t really a strong case for not being customer-centric. Look at how small Apple market penetration is. If they were to follow the 4 C’s (which they most like never will), they’d be forced to reduce their price, because most people can’t justify the overall cost of purchasing a Mac. Yes, they have loyal fans but they don’t have the global penetration that Dell has and there’s a reason for that. Dell has a customer, cost, convenience and communications model.

    Cheers,
    Beth Harte

  13. The Atomic Tango writes: “Apple, for example, disdains consumer research.”

    Mktg Tea Party replies: Do NOT get me started on the ridiculousness of all these “voice of the customer” programs. 🙂 As Apple’s history demonstrates, consumers don’t always know what they want, or as you point out Freddy, they’re often “unreliable sources of innovative ideas.”

    As for 4Ps, or 4Cs, I’ve got to tell you (“you” being both Freddy and Beth), that in the world of financial services, neither construct is in use. The world of bank marketing relies on the 3Ps: 1) Predict (what a consumer will buy, when s/he will buy it, and (a more recent element) in which channel s/he will buy it; 2) Push (as in push messages out to various channels, especially direct mail); and 3) Pray (as in pray for a slightly higher conversion rate than the last campaign in order to claim success).

  14. I do teach Schultz. Some good concepts, but generally problematic, and very poorly written.

    If the 4C’s are a precursor, wouldn’t they be the “antiquated” framework? The 4C’s are also fundamentally flawed — quite horrifically so, I must say — by including “customers” in a marketing mix. The marketing mix consists of TACTICS; the customer is a STAKEHOLDER. Including “customers” in the mix is poor semantics in addition to being poor strategy. That’s like including “fans” in a football playbook.

    Convenience, cost and communications are just variations of the terms place, price and promotion — and poorly considered ones at that. For example, different customers incur different costs in procuring the exact same product from the exact same location, so “cost” is nonsensical.

    Rather than repeat all my objections to the inane 4C’s framework here, I have detailed all of my criticisms in this post: “Marketing Mix-Up: Being Treated Like Lois Lane” http://bit.ly/iaBCNa

    Lexus is not customer centric. It never has been. It does not center its operations on customer needs — one can’t order a Lexus exactly to one’s liking beyond a few options and accessories. Customers have no more options with Lexus than they would with Mercedes or BMW. Lexus centers its operations on engineering and mass production. Its corporate structure is highly siloed, not structured around customers.

    The one car company that was clearly customer-centric was Saturn. Where are they now? Oh, right, they were so focused on serving customers, they forgot to innovate, and were destroyed by product-centric competitors.

    Back to Lexus: Good service alone does not make a company customer-centric. Lots of companies provide great service without putting the customer at the center of their operations. The McDonald’s near me is consistently fast, polite and clean, but that doesn’t make them customer centric.

    Dell is a troubled company that is struggling to eke out a profit. It struggles to extend its brand into other product categories. It’s forced to compete on price. Its stock price has flatlined. And for all its customer-centricity, it commands no customer loyalty. It has lost its low-price leadership to even lower-margin companies. Dell is in a race to the bottom. If Dell is the model, why would anyone want to be customer centric?

    Saying that Apple would have to lower its price to be customer-centric is completely wrong. Many customer-centric companies are high margin (Four Seasons, Neiman Marcus, IBM).

    This exchange underscores Ron’s point: customer centricity is poorly defined, and it’s manipulated to mean whatever its advocates want it to mean. Professor Ranjay Gulati came closest to defining customer centricity by endorsing a fundamental restructuring of corporate operations, with the removal of corporate silos, and the establishment of cross-functional teams managed by customer-focused generalists. Few companies are set up that way. And even Gulati failed to prove that this system is better than any other.

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  17. Freddy and Ron, I have been thinking about your comments for the past week and I have come to the conclusion (maybe you are here already?!) that we’ll just need to agree to disagree.

    I am so very fortunate to have been able to work for companies (high tech B2B, IT services, software) that have allowed me to work directly with customers to figure out their wants/needs, what they view as costs, where and how they want to purchase and how they prefer to be communicated with. As well, I’ve worked with clients (financial and CPG) who diligently “listened” to the market and customer to better their marketing and businesses.

    I know you both don’t believe in putting the customer at then center of the organization (well, based on your comments), but I sure do…and it’s never failed me in over 15 years. And I will continually work to help companies understand the HUGE benefits that come from being customer-centric (or at least, customer-focused).

    I just hope I never get to the point in my career where I have disdain for the profession or customers. I hope one day you will both experience how wonderful both truly are!

    Cheers,
    Beth

  18. Beth:

    Please read my articles closely. In them, I clearly state that customer-centricity is an option for certain types of companies at certain times – ideally customized transactions that are complex, long-term and high-margin. Note how that dovetails with high-tech B2B and IT services. Note how that does not fit FMCG, running a sports team, or designing a tablet computer for the mass market.

    My objection is to the zealotry and complete lack of critical thinking when it comes to “the hot new thing,” whether it’s Twitter, customer-centricity or the Tea Party. Keep in mind that, at one time, Frederick Taylor’s Efficiency Movement swept the business world with its promises of utopian frictionless manufacturing; years later, it was considered an abject failure in considering the limits and needs of workers.

    Do what works for you – and all power to you. But note that just because you succeed at something, doesn’t mean it’s going to work for anyone else. Cookie-cutter solutions and “best practices” can be a waste of time (or worse) in business.

    Freddy J. Nager
    Atomic Tango LLC

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