Why Customer-centricity is Key for Sustained Commercial Success

In 2021, most consumer-facing businesses still look at ‘the cost to serve customers’ rather than the benefit.

This is fed through into the disproportionate sums that are spent on acquiring customers compared to retaining them, with almost no focus on customer lifetime value or driving loyalty. I’ve even heard industry luminaries say that ‘loyalty is dead.’

However, my contention is that loyalty never really existed and if it did, it was largely down to a lack of consumer choice before the age of the internet.

Despite some noise about customer promiscuity and how much loyalty consumers display, there is a clear cause and effect on this. The internet drove proliferation of choice, which caused the balance of power to shift from retailer to consumer.

And given the lack of effort to build relationships with customers from so many – you could argue customers have not been given many reasons to be loyal to one brand over another.

Despite this, and as demonstrated in my book, The Power of Customer Experience, there is a direct correlation between brands that are customer-centric and their commercial performance over a sustained period of time, compared to those which are not.

One of the best examples of a brand that failed due to a lack of customer-centricity is Blockbuster Video. They weren’t close enough to their customers to see how their wants, needs and behaviour was changing. They didn’t see on-demand TV coming. They also turned down the opportunity to acquire Netflix for $50m!

The COVID-19 pandemic has had a huge impact on every sector that serves consumers. It has also accelerated the growth of ecommerce as a percentage of total retail sales by 45% to 50%, thereby achieving 10 years of growth in less than a year.

Not only that, but it has also had a big impact on how we as consumers feel about the brands we engage with and give our money to. What a brand stands for, its values and purpose, have become just as important as the products they sell and how much they sell them for.

Taking all of that into consideration, here are the top five traits that I’ve identified in brands that are commercially successful and truly customer-centric:

1. People first

Customer-centric brands create a culture of opportunity, collaboration, empowerment, learning and development and with a genuine purpose to do good at its heart.

They never penalize failure; they celebrate it as an opportunity to test and learn and to improve what they do and how they do it.

Their people are trusted to make decisions for customers, which delivers better experiences for them and a stronger commercial outcome.

A great example is Home Depot in the DIY space in North America. They empower their front-line colleagues to offer discounts to customers to close the sale. They also offer to reimburse their employee's tuition fees and encourage them to embrace further education. Finally, they help their people out whenever they have a financial emergency. And how do they perform? Home Depot’s share price has grown by nearly 140% over the past 5 years.

2. Social and environmental responsibility

Responsible businesses are hugely important to both customers and stakeholders – but the responsibilities must be lived and breathed.

Consumers are moving towards conscious consumption and every consumer-facing business needs to think through what this means for them and their customer’s expectations of their behaviour.

The leaders in this space in retail are often the outdoors brands. Patagonia being a primary example. Their focus on the environment, sustainability and supporting many related causes has endeared them to an extremely loyal customer base. In doing so, they increased their sales by nearly 100% between 2012 and 2017 to around $1bn per annum. Not bad for a brand that promotes anti-consumerism!

3. Diversity and inclusion

To be diverse means to have people at all levels of the business who represent the communities we operate in and the customers we serve. After all, if the people making strategic decisions about the direction of travel of the business are too far removed from the customer base, how can they be expected to make the best commercial decisions?

For example, there are 14 million disabled consumers in the UK. For the majority, their needs are poorly met. Imagine having someone on the board who could be a voice for disabled customers and what the potential commercial benefit of that might be.

Long before Black Lives Matter became a movement, Diageo had set up support groups for employees of Asian and African heritage to support ethnic minority colleagues. They also run a Rainbow Network for LGBT+ employees. They are an organization who walk the talk when it comes to diversity.

With a strong female representation of around 44% of the boardroom and 40% of the executive committee, it has set a similar target for female representation of 40% on its global leadership team (a group of people who sit below the board and executive team) by 2025. Their efforts around diversity have also been recognized when in 2018 Diageo was named the leading FTSE 100 company for its representation of women on boards and in 2019 and were ranked 2nd in the Thomson Reuters D&I Index. They are also a Disability Confident company. This is a government scheme designed to encourage employers to recruit and retain disabled people and those with health conditions.

Their performance? Their share price has increased by 65% over the past 5 years.

4. Turning customers into fans

Customer-centric businesses can deepen both the emotional and rational attachment to the brand. The former often driven by purpose, values and culture, the latter by great products, customer service and experience.

An example of a brand that has fans as opposed to customers is Tesla. They have democratised the whole car buying experience as well as being the innovators and clear market leader in the electric car space. They enable customers to buy cars in shopping centres. They don’t have pushy, car salesmen. They are now one of the most valuable brands in the world with a market cap more than 3 times that of Ford, VF and GM put together!

5. Measure the right things

Businesses focused on putting customers first understand that traditional operational metrics such as footfall, traffic, conversion rates and average order values are important to know, but don’t deliver insight that can help you to improve your performance. These are merely outputs.

The inputs are far more important. These include customer satisfaction (CSAT), net promoter scores (NPS), product availability, first-time resolution of customer service issues and so on. What you really need to understand is why operational KPIs up or down? Only the right inputs can help to answer that and for you to take corrective actions.

Whether you’re cutting keys and re-heeling shoes like Timpson or selling outdoor clothing and accessories, which Patagonia does with aplomb, or continually expanding your range of products and services as Amazon does, these brands and those who are commercially successful year after year after year, are truly customer-centric. That is their most important differentiator.