Retail executives today commonly describe their organizations as customer-centric. Most of us have probably even witnessed that big "our customers come first" announcement, where the CEO proclaims a new era of customer-centric strategy. However, as customers, we often experience the opposite, with gaps in product or service needs, hidden fees, misleading or irrelevant offers and poor customer service.
The problem is that great insights do not always turn into great actions. The idea of placing the customer at the center of business decisions has largely remained just that: an idea. While many retailers use customer-centric language, many struggle to make real progress or move customer insights outside of traditional marketing silos so they are leveraged throughout the organization. Looking deeper into the problem, instituting change across an organization is an even greater challenge because it involves people. The decision to create a customer-centric enterprise has to be initiated and owned by the CEO but it is often those employees that are two to three levels below the executive that are the most critical to a transformation.
When dunnhumby began working with Tesco nearly two decades ago, organizational alignment was identified as a critical element for sustained growth beyond the short-term impacts of tactical insights. As Tim Mason, marketing director of Tesco, once said, "All these insights are of no use unless you turn them into action." Embedding the customer into the strategies, processes and foundation of a company helps to drive actions from customer insights that keeps retailers ahead of the competition and enables more effective customer management, which drives loyalty and an increased customer lifetime value.
Many companies are learning to set aside preconceived ideas, intuitions or assumptions about the needs and wants of their customers. Shifting from "what we think we know" to a data-driven understanding is helping to create a more comprehensive view of the customer. However, even where data is defined and available, a systematic, company-wide process of developing and communicating customer insights is usually lacking. Without that systematic approach, insight and data are great, but they won’t lead to the customer-centric business transformation that will achieve sustained growth.
The key elements of customer-centric alignment:
Building a customer-centric strategy
Starting with the vision and mission, retailers need to embed the customer into the overarching strategy of the business. Many visions include key words like "best performing," "greatest" or "largest retailer" and this company-centric messaging leaves little room for the customer. Few talk about "earning the customer’s lifetime loyalty" and even fewer understand what it means. The vision of a customer-centric organization is key because it creates the future state that the organization will be attempting to realize. By clearly articulating the high level goals that guide the business, a data-driven customer strategy will emerge, one that can be communicated and connected to action plans and measures throughout the organization.
Evaluating critical processes
Key insights about the customer should inform not just the strategy but key processes including store operations, channel management, loyalty, customer communications, pricing & promotions, and product assortment. When CVS launched their ExtraCare program, it enabled the company to start making more customer-centric decisions. By examining customer behavior through the lens of customer insights, CVS understood that their most loyal customers were heavy cosmetic users. In response, the retailer launched their "Beauty at the Door" program that helped to reorganize store layouts, product offerings as well as segmented marketing and customized mailing campaigns. Within six to eight months of the loyalty program launch, customers spent 35 percent more in the program’s first year than in previous years. Seven years later, the increase was sustained with over 5 percent increase in same-store sales from 2008 to 2009.
Motivated by the overarching customer strategy, executives need to evaluate and embed customer insights into key processes:
- Do operational strategies clearly link to and support the overall customer strategy?
- Do periodic processes, day-to-day behaviors, and everything in between exhibit a deep concern to understand the customer and address their needs?
- Do actions and processes seek to understand and engage customers with one-to-one relevance?
- How are we measuring our ongoing success? Is it with sales and profitability alone or is it supplemented with customer data?
Building a foundation
An organization is united by common language, values, aspirations and goals that are embedded into the structure of the business, engaging employees at each touchpoint. Building a foundation that supports and furthers the customer-centric strategy is a key element of engaging employees in the transformation.
- What are the customer KPIs (key performance indicators) and are they embedded in an incentive structure?
- Are customer insights accessible and easily understood by all levels of the organization?
- How do we ensure that customer insights are being analyzed and evaluated in a consistent way? How do we sustain ongoing insight as the business, the marketplace and the customers change?
- Does clear accountability exist for a customer data strategy, customer data management and evaluation?
- Are there rewards for employees who use customer insights and penalties for those who do not?
- Are customer insights shared with key suppliers to improve decision making across all merchandising and operational levels?
Gaining a commitment to change
As Charles Darwin famously noted, "It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change." Changing from the current to future state is typically uncomfortable for people and each member will experience this transition differently. Moving through the transition is a journey rather than a single event where new rules are established, new processes and structures are built and new ways of working emerge. Gaining alignment requires a clear understanding of the current state and a clear business case supported by successful case studies that will help to gain the buy-in of all stakeholders.
Making it happen
The redesign of each key operational process should be organized into an architecture that details how the process integration will move through the organization and the people that will be responsible for seeing that through. A key piece of that integration is identifying who is responsible for ensuring both internal communication and education. As managers, we understand that people support what they help to create. The education and training of employees around customer data, how to use it and how to apply these insights also requires opportunities for feedback and a clearly defined rewards structure with internal KPIs developed around the customer. Finally, vendors also need a place within the educational program with collaborative category planning, communications and overall strategy alignment around the customer.
Many businesses have great insight, but turning those insights into action and achieving customer-centric results will require the alignment of the entire organization. Many executives underestimate the investment in placing the customer at the heart of the business. Aligning around the customer, while challenging, offers increased customer lifetime value through these key benefits:
- Embeds an organizational capability around the customer to create sustained change beyond the short-term impact of tactical insights.
- Moves customer insights beyond traditional silos such as marketing so they are leveraged throughout the organization.
- Creates more effective collaboration between retailers and suppliers - focusing on the customer and the growth of the category rather than margin.
- Creates cultural and behavioral change where the customer drives decision-making.
Dave Palm is Vice President, Organization Engagement at dunnhumbyUSA where he works with clients such as The Kroger Co., Macy’s and Panera to align their organization around the customer. (Photo by David Blackwell.)
|Which retailers do you feel are truly customer-centric? Talk about it in the comments below!