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Wednesday
Sep262012

Think Your Company Is Customer-Centered? Think Again!

Marketing is not just a department; it is much more than advertising, selling or public relations. According to Webster’s, marketing involves “the commercial functions involved in transferring goods from producer to consumer.” While this is technically correct, marketing  involves more than the technical execution of functions. 

The definition of marketing that I prefer is: “matching company assets with customer wants and needs.” A company’s definition of marketing is the driving force that determines whether a company is market-driven or product-driven. (Product-driven companies differ from market-driven ones. Market-driven companies listen and understand their customers, donors, and clients; then, build products and services that are tailored to their core competencies.)

Properly  allocating company assets with their core competencies “drives” a company closer to fulfilling customer wants and needs.   An example of this is the paperclip company that began to listen harder to why customers used paperclips.  They were driven to do so by ever slimmer margins. 

Paperclips are the same from any company.  They were engaged in a commodity war: one that only the lowest-cost producer could win.  As a result of listening to customers, the company determined that paper-flow was important to the paperclip use.  The result was that a paperclip manufacturer eventually became an expert consultant in paper-flow!  Over time, the paperclip company actually purchased paperclips from their competitor because they could produce them for a lower price!  This company no longer manufactures products!

While this definition of marketing has been circulating within academic circles for at least thirty years, the story has not become the normative experience for companies.  The majority of companies have a long way to go towards becoming truly customer driven. 

Why is becoming a customer-centered organization so rare?  There are several reasons. The basic ones have to do with changing--or not wanting to.  It takes a visionary leader to change a company without a need.  The paperclip company,  in the example above,  had the need. 

Another reason is that many companies are impeded by the very structure that allows them to function in all other ways: accounting.  Traditionally, accounting systems have not been built to capture customer information.  In fact, until only recently, medium and large-sized companies had to deal with summary level numbers in reports because computers lacked the memory to keep all the detail.

Technology has changed all of that.  Disk storage has become incredibly affordable.   Now,  some companies are falling all over themselves trying to capture customer information; however, some are finding it tougher than they originally anticipated it would be (as with so many other computer system projects). 

In many cases, the complete orientation of the company must be shifted in order to achieve a complete market-driven company.  I call this the Customer-Centered Organization.  This innovative new form of organization builds information around the customer, not around revenue types or expenses.  Information about who the customer is, what they buy, how profitable they are, and why they are motivated to buy, allows savvy business people to really “listen” to what their customers want.  This new type of organization orients every department, product, and service around the customer, rather than around organizational charts, production schedules, or other Industrial Revolution-styled organizational structures. 

In the past, the traditional organization worked well with mass marketed products in the case where the customer bought exactly the same product.  Henry Ford  reportedly said,  “You can have any color of car as long as it is black.” Consumers were so starved for basic goods, at prices low enough to be affordable, that customized products became a thing of the past.  While the first automobiles were built to order for the rich, new production techniques reduced prices dramatically, creating new markets.  The demand for these products increased, allowing production costs to be lowered, based upon increasing volume. Only the most basic information about the consumer was needed. In other words, customers were not as important to a mass market.

Viva la Difference!

Today, in a world where hundreds of thousands of new products are created each year, the difference in the products are why they are purchased.  Without this difference, only the low-price-producer wins the game.  The new, sophisticated customer, already possessing substantial “goods,” demands much more from products in the way of function, and design, even  with products bearing “brand” names.

The old mass-marketing approach that built America’s Industrial Revolution, is now the approach that is killing many businesses.  Understanding the subtle differences in what motivates a customer to buy is the new competitive edge.  However, this edge does not necessarily lower production costs.  This need to really “listen” to one’s customers drives the need for a new organizational and informational structure: The Customer-Centered Organization. 

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