“When markets experience commoditization, what do companies do? They proclaim ‘customer centricity’ and try to differentiate themselves in multiple ways. But few companies truly know how to become customer centric and most don’t pull it off.”
The above was noted in the Harvard Business Review white paper, “Unleash the Power of Marketing to Drive Innovation and Profit,” by Ranjay Gulati, Professor, Harvard Business School; Author, Reorganize for Resilience: Putting Customers at the Center of Your Organization, in conjunction with Angelia Herrin (Moderator), Editor for Research and Special Projects, Harvard Business Review.
The result of what Mr. Gulati speaks of is that once again, in the face of a company’s inability to “pull it off,” marketers are required to reinvent themselves, creating value rather than simply enabling it. Marketers are increasingly joining the product development and innovation conversation at the ground level instead of merely devising ways to engage and reinvigorate the business with customer relationships. Today companies must offer consumers products and services with relevant and significant value. By understanding what customers want and need more deeply, marketers can demonstrate that customers are willing to pay more for exclusive and luxury brands. Groundbreaking market disruption, such as we have seen through the innovation sparked by Steve Jobs and Apple, is one of the only ways to truly differentiate a brand to propel consumer interest beyond common price comparison.
Profit = Volume x Price –Cost.
If Price declines, profitability depends on growth through Volume and Cost.
High-end and luxury market leaders are not in a position to boost volume by competing on price which is already at a premium level. Reinventing themselves as low-cost providers undermines the quality and caché of the brand and leads to a commoditization business model no competitors want nor can support.
It would be naïve to even begin to think that any single company can know consumers well enough to anticipate behavior, yet exceptional instances of innovative disruption continue to break through the clutter to continuously emerge as leading luxury brands such as Louis Vuitton, Gucci, and Cartier.
Four reasons why companies fail to know their customers
Relying solely on toolsets or process as a solution. CRM, customer service, listening to the customer, and customer segmentation are only individual components that can act as starting points, but only provide a shallow glimpse into customers’ thought processes. Data can show trends in customer behavior, but not the reasons why the trend is occurring. However, accurate and complete customer data is a prerequisite to embracing a customer-centric environment and ultimately, to improving business. While data capture falls upon customer-facing employees, the impact of what that data shows is felt by everyone.
Remaining stationary in market approach and pricing. Competitors’ approaches and consumer trends are constantly evolving, and the information available to and shared by the customer via social media channels is rapidly amassed. Often, by the time a company realizes that they are being undersold and that the negativity has gone viral, the damage has already been done. Only true, out-of-the-box value creation, plus proper pricing and excellent customer service, can reverse this downward trend.
Understanding the potential sales conversion triggers and that they change. Product/service attributes that were once purchase motivators often fade to basic expectations as the market matures. Once the excitement of a conversion factor has dissipated, new and great conversion triggers—not just copycat features of competing products or marginal improvements—must be identified and adopted as part of the sales presentation.
Fixating solely on product or service features and benefits. The lifestyle context for product use by the customer is a very personal and individual path. Companies often approach customer viewpoints with a myopic view from the foundations of their own offerings. Only by getting back to basics—putting yourself in the customer’s shoes and understanding and measuring the priority of aspects within their lifestyle and associated needs—can companies create solutions that make the product or service a truly essential component of the customers’ daily routine.
Mr. Gulati writes, “For marketing to realize its calling as owner of customer centricity, the role of marketing departments and the identity of marketers must be re-envisioned.”
Indeed, the single marketing function needs to unite the functional silos of business, to provide a single, united channel for delivering products and services to the customer that resonate and excite.