Customer Centricity: The Complete Guide
If we take a look at the most successful companies in the world, Amazon, Google, Apple, etc. Their success is hinged on creating products and services that are embedded in customers daily lives: Amazon with their ability to source almost anything in a timely manner, Google with their globally-used search engine, and Apple with their easy-to-use, popular suite of technology and software.
The thing that each of them have in common, is their ability to produce exactly what their customer need, want, and will use as default whenever necessary, which is exactly what customer centric-businesses do.
In this guide, you’ll learn:
- What customer centricity actually is
- The history and importance of customer centricity
- The differences between the different levels of customer focus, and where centricity on that scale
- The benefits and strategies involved with customer centricity
- How stakeholders can become customer-centric through market resarch
- The mistakes stakeholders fall prey to when seeking customer centricity
Customer Centricity — An Introduction
There are numerous terms bandied about the business industries to describe strategies, techniques and ideas all centred on the customer experience. Stakeholders talk about the importance of customer satisfaction and designing the right experience to promote customer loyalty, but where does customer centricity fit into all of that talk?
Definition of Customer Centricity
According to Gartner’s’s glossary, customer centricity is “the ability of people in an organisation to understand customers’ situations, perceptions and expectations. Customer centricity demands that the customer is the focal point of all decisions related to delivering products, services and experiences to create customer satisfaction, loyalty and advocacy.”
Customer centricity is typically used as a catch-all term for all of the buzzwords expressed above. It is the key to creating the ultimate customer experience, to gaining as close to 100% customer satisfaction as humanly possible, to be as customer-led in stakeholder decision-making processes as they are expert- or data-led.
While many businesses try their best to centre and structure their organisation around their customers, just 5.8% of businesses were actually set up this way according to research conducted by Marketing Week. With the growing popularity of customer centricity (displayed by the many articles and blogs advocating for the transformation in businesses), it’s clear to see that the power between business and customer has shifted and continues to shift as more customers realise the power they hold; where once a business had the power to thrive and deliver what they believed was needed in the world, customers are now understanding exactly the sheer amount of influence they have over the success of a brand.
The Growing Popularity of Customer Centricity
Prior to customer centricity, businesses could focus on themselves, their products and services, and the profit they were making from their customers. This served them well in terms of success, but in this relationship, the business held all of the power. Most businesses those days made their household name from their chief product and were marketed through their products that could serve customers rather than the business itself. This “product-centricity drew its foundation from the early years of marketing” according to Shah et al. and it wasn’t until the 1990s that they noticed a distinct shift towards customer centricity.
The concept of customer centricity and all of its associated benefits have been discussed for more than 50 years across all industries. But all those decades ago, there were fewer businesses, less convenient communication channels, and the concept of fast-fashion, fast-food, fast-anything wasn’t as ‘fast’ or convenient as it is today.
According to Statistica, there were “approximately 213.65 million companies worldwide in 2020”, compared to just 122.37 million in the year 2000 and a meagre 43.2 thousand listed companies in 1975. This massive number of companies spread across a similar amount of industries that there was in the 1970s, even if the technological industries were still in the very early stages as technology developed. This technological innovation has widened the scope of business, which has, in turn, widened the scope of shopping for customers, so there is a lot more choice and thus a lot more competition for businesses in this day and age than there ever was.
In an article in the Journal of Service Research written by Shah et al. in 2006, they identified that there were 5 trends reinforcing the need for firms to make that transformation:
- Intensifying pressures to improve marketing productivity
- Increasing market diversity
- Intensifying competition
- Demanding and well-informed customers and consumers
- Accelerating advances in technology
These pressures are still very much in play in businesses today, with all of those factors intensified by the sheer number of technological advances, competitors and well-informed customers. The market is pretty diverse, and the need for marketing productivity has very much not been met and in fact intensified again with the new expectations placed on the customer experience by customers and consumers.
“We have been able to use a co-creative approach, informed by customer feedback, to redesign a number of services. Our customers have now become hugely involved with what we’re doing both today and tomorrow.”
Head of Performance & Insight, Curo
The Importance of Customer Centricity
In this environment with the shifting power dynamic between customers and businesses, the concept of customer centricity was and still is, the key to forming the right relationship between customer and brand so that businesses could better understand what it is they needed to do to succeed.
By improving the relationship between customers and brands, there is an enhanced understanding of the other party on both sides of the equation — but how do businesses improve the relationship when they’re not customer-centric? It becomes a little bit of a closed circle, but the only way to break the circle is to take the first step, whether that’s towards improving the relationship through communication or through creating a customer-centric culture within the organisation.
This type of human connection formed between the brand and customer base is crucial to creating more value in the long term. It creates a collective mindset ready to design the desired outcome for both parties. In her article on Human Connection published in the Journal of Creating Value, Michelle Farifield wrote that “in every transaction between the customer and a company representative, value is always being created or destroyed”. Positive value helps build that relationship between the customer and brand, and any negative value breaks it down.
Because we assign more energy and emotional recall to negative emotions and experiences, any negative experience with a company tends to impact the customers’ decision a lot more than a positive experience; thus, it’s more important for brands to create more positive experiences than negative ones if they are to maintain a positive relationship with customers.
Social media has had a huge influence on the public perception of a brand, which has exacerbated the need for customer centricity. Because social media allows for easier communication between larger groups of people across the world, word of mouth advocation or damnation holds a lot more power than it once did. If a business doesn’t step lightly or hold good enough values, then it will be held accountable on this platform, so it’s success is hinged on how well they perform for all customers, not just the few.
Shah et al. identified that the importance of customer centricity had only recently been embraced by the business community in the early 2000s, but if we take a look at some of the thoughts still embraced in all industries today we can see that it is still regarded as more of a trend rather than a strategy to help realign businesses to customer needs and take advantage of this new dynamic.
Benefits of Customer Centricity
Those brands that are customer-centric reap numerous benefits, such as:
- A natural evolution of the business and brand in the future without the need for disruption as a catalyst
- A source of insight that will help stakeholders craft a unique and successful customer experience
- A culture of insights, which will help boost the success of decisions across the organisation
- A glimpse into the future and a way to spot innovative opportunities
- A business culture powered by customer insights
On the business’ side, a better understanding of customers can only help their journey to success; through a better understanding of customers, businesses can revolutionise their communication strategies to help reach more of their target audience and to communicate on a more regular basis. Insight teams within the business can also use this information to recruit better samples for market research, and through this research create another communication channel that leads to directly actionable insights that will give stakeholders better ideas for where to go next or what is missing from their nearly perfect customer experience, product or service.
For customers, gaining a better understanding of the brand they’re interacting with means they can gain a better understanding of what to reasonably expect from the brand. Instead of putting down everything they desire and more, they can understand what businesses are capable of, and then work better with the business through market research to find ways of bettering the company at a more realistic pace.
Focussed vs. Centricity vs. Obsession
While customer centricity is the term banded about most now, there are actually three tiers of customer centricity to note:
- Customer Focussed
- Customer Centric
- Customer Obsessed
How can stakeholders tell when they’re practising customer centricity, or whether they’re simply focussed or on the opposite end of the scale — obsessed? These tiers hold certain practices and characteristics that define them and stakeholders can use these characteristics to help identify where on the scale of customer centricity they stand.
When businesses are ‘customer focussed’, this typically means that they’re looking at customers in general and conducting a bit of research to see what they think, but stakeholders are still mostly using existing business data and experience to make key decisions. The awareness of customer trends, movement and behaviours is there in the background but doesn’t have much of an impact on the strategic direction of the brand, or the design of the products and services that they’ll be using. Customer focussed brands typically only use customer insights in decision-making strategies in the boardroom, if at all. The technological infrastructure in the business typically only enhances the informational silos often seen in businesses today, and as such, the lack of access is one hindrance that stops organisations like these from graduating to customer-centric status.
Customer centricity, on the other hand, is the act of observing customers taking notes on their likes and dislikes, their movement and the trends they’re currently subscribing to, and actively thinking about and talking to customers to figure out what their needs are and how the brand can best serve them. The insights from these conversations are then taken directly to the boardrooms where stakeholders will factor in the voice of the customer into key strategic decisions. In this strategy, the voice of the customer is embedded into decisions in this way across the entire organisation, meaning informational silos normally present in customer focussed businesses are removed and customer insight is freely available for each individual team to look at and use when the occasion arises.
Customer obsession takes centricity to another level. This strategy means stakeholders talk to customers on a regular basis, setting research to discover everything about their customer base and their target audience (if these are not one and the same already). Once the insights are generated from these continuous conversations, they are taken up to the boardroom and nothing else is taken into account other than the customers desires when making key decisions across the business. Embedding the voice of the customer into decisions across the business on this level is mostly unseen, but there are a couple of famous examples like Amazon that highlight the pros and cons of this particular strategy.
Despite customer obsession sounding like a good way to make sure that brands are built to serve the customer need, there are dangers of customer dangers of customer obsession that are worthy of note. The first is the lack of innovation associated with chasing exactly what customers want and nothing else. According to Maisie Furneaux in her blog on the dangers of customer obsession, she notes that innovation often falls by the wayside because innovation is “often not as big of a priority” in the face of chasing customer happiness. She also notes that “customers don’t always know what they want”, and so more time is wasted on trying to figure that out when efforts could be focussed on more productive outlets.
Deciding which option to choose is a crucial decision, and indicates exactly how dedicated the brand is to its customers. Brands should take a look at what they can afford, what they can feasibly commit to, and what resources they already have that they can take advantage of in this time of transformation.
Becoming Customer Centric
The journey to customer centricity starts with the realisation that in order to survive, organisations need to be more than just a business. Stakeholders need to work to understand exactly what their customer need and then use that vital information to create a proper brand that their target customers and consumers can share values with, that aligns with their customers. This information will also help the newly formed brand communicate with their customers through the channels and in the language they prefer.
This brand, this new identity, will help stakeholders reaffirm who they are, what and who they serve. Their new set of values will drive the business objectives, and unite all stakeholders under one umbrella so they all work towards achieving those same goals.
While the goal is admirable, because most businesses operate under what are very much organisation-centric strategies, there will be a number of challenges that stakeholders will face on their journey to customer centricity. Understanding those challenges and preparing for them is the first step towards achieving customer centricity.
Challenges to Customer Centricity
The first challenge is that of alignment. The alignment of values, goals, etc. between customers and brands cannot be overstated, with more customers favouring brands now that are connected to society and share the same concerns as they do over issues such as sustainability. According to a journal article by Don Peppers by Don Peppers, there are three platforms in which alignment becomes an issue for those working towards customer centricity:
- ‘Alignment 1.0’ problems originate from the disjointed nature of customer experiences. Where teams within the organisation “do not adequately coordinate their dealings with an individual customer, resulting in an experience that is disjointed and often perplexing to the customer”. From a customer’s perspective this particular misalignment means they are treat worse by the business the more the customer interacts with them or buys from them, a problem frequently combatted by adequate customer relationship management strategies.
- ‘Alignment 2.0’ problems happen when there are cross-purpose goals and metrics between teams, particularly those teams that are closest to the customer: marketing, sales, and customer service. The different ways of distinguishing and measuring success greatly hinder the unification of a business under one brand and perpetuate informational silos. Conflicting strategic goals that don’t align with the wider business objectives are a waste of everyone’s time no matter how important they seem in the moment.
- ‘Alignment 3.0’ problems relate to the “reconciling of goals of a customer-centred strategy with a company’s broader financial metrics.” The long-term value created by customers aren’t normally reflected in the fiscal metrics, but this problem isn’t one easily overcome; in most organisation-centric businesses, the financial metrics will almost always come first to customer-centric data, and this is the challenge that most stakeholders will struggle to make. It can essentially be categorised as ‘old habits die hard’.
All of these alignment issues have one thing in common, outdated strategies and miscommunication or no communication attempts between stakeholders and teams.
“Our customers are our stakeholders; their opinions and feelings are vital to the success of the society. As such, their engagement with our research is crucial.”
Customer Research Specialist, Coventry Building Society
Organisational and informational silos
Organisational silos are a mind-set present in some companies where teams do not want to share information with others in the same company. Alignment is only one challenge that’s perpetuated by the maintenance of organisational silos. Stemming the flow of information from one team to another throughout an organisation does have an impact on the alignment of teams underneath common goals and objectives, but it also has a number of other impacts on the day to day workings of the organisation and the customer experience.
This ‘mine’ mentality is thought to have been brought about by the competitive nature of business, but graduated to within the organisation rather than kept between businesses. It keeps teams from reaching their full potential in terms of resources, effort and output, and stops departments from working together in order to create better products, services and experiences for customers.
The customer experience relies on communication from all departments, the free flow of crucial information in a secure way that helps all teams get onto the same page without the fear of data going missing or being stolen. Without this easily accessible information and communication between departments, each team the customer deals with has no prior information on the issue or solution expected, and so the experience the customer will encounter will be negative.
On a more brand-related level, organisational silos keep teams from fully understanding why they’re doing what they’re doing in the grand scheme of things, and so stops them from caring quite as much about the job, the customers and the business — the employee experience degrades and the cycle continues with any new hires as churn increases. Customer centricity and the tearing down of silos makes for a better employee experience and a better place to work.
Technology and Accessibility
For communication, storing and sharing purposes, technology has been a boon to all industries by creating digital platforms for each team to store and communicate important information. Knowledge management platforms are a common solution to this particular problem, giving the organisation a shared structure to work on instead of individual teams running towards their own objectives without understanding or seeing how it impacts the wider business.
In the insights industry, the terms given to our own type of knowledge management platform is a ‘data warehouse’ or ‘insights inventory’, which can be one solution to the problem of accessibility; but this is a solution that will take a little time, effort, and resources on behalf of the insight team and/or stakeholders to create depending on if they want or need to record historical data as well as present and future data collected from crucial research projects.
The technology to access and communicate with a brand’s customers is already in place — it’s called customer service and social media. With a good number of the world’s customers on the internet in some form or another, this isn’t a problem that requires more technological solutions in order to be solved, just the knowledge to use the technology that’s already existing to it’s full advantage. There are some businesses such as Innocent Drinks who understand how to communicate with their customers and target audience through both public and business-owned communication platforms, but this is a rare quality that not many other brands have been able to pull off with as much success. The soft skills that are required to use the technology to its fullest extent is something that only recently are becoming recognised as valuable.
Solutions to Customer-Centric Challenges
Most of the challenges stem from two major themes — a lack of communication and access to information. So, the solutions for those challenges must work to facilitate communication and create easy access to information and insights whenever and wherever possible:
- Customer and Insight advocates are embedded in each team, to make sure that the flow of data and the communication between each team and to customers are facilitated to its fullest extent. These amplify the voice of the customer and the power of insights throughout the business and beyond.
- Building up the brand of the insight team within the organisation is crucial to making sure that all teams know the insight team is there to provide as much data and insights as is needed to make sure the customers are factored into every decision across the business.
- Embedding customer thinking and insights into the company culture is vital to make sure each stakeholder in the business automatically takes into account customer insights without the prompting of someone from the insights team — but this will take time and effort on the part of the insight team and stakeholders who are already insight advocates.
- Making communication easy — this means evolving communication strategies both inside the firm and externally directly to the customers themselves. While this might seem like an obvious one, too many stakeholders are of the mindset of ‘if it’s isn’t broken, why fix it?’ And so their current communication strategies, while adequate, are in danger of falling behind the times and it takes longer for teams to get the information they need.
- Tell stories with data to make insights more engaging. Research reports shared throughout an organisation have typically been lengthy, wordy, and time-consuming to read, but there are better mediums now (video, infographics, lunch and learn sessions, etc.) that can communicate insights in an engaging way in less time than it takes to make a cup of coffee.
- Insight teams could involve more people from the other team in the insights experience, which in some cases actually helps inform the research design process and generates better insights in the long run; but if we make sure stakeholders have a front-row seat to some of the data collection processes, they gain a lot from a direct connection to those who are impacted by their decisions.
Conducting Customer-Centric Market Research
There are an incredible amount of ways to conduct market research. From running simple surveys to collecting passive biometric or geological data, there are an infinite number of tools combinations to try and make this market research project the best it can be. But how do we know when we’re conducting the right research? More specifically when it comes to researching customers, how to make sure you’re getting the right data (accurate, relevant) so that you completely understand and are catering to your customers? Because that is what distinguishes market research from customer-centric market research. There are a few ways to help keep stakeholders and research projects on track focusing on the customers:
Agile as Iterative
Agile market research is thought about in a three specific ways specific ways: cheap, quick, or iterative. Most of the time, insight teams take agile to mean iterative, which is a term borrowed from software and development engineers. Their iterative testing processes is exactly what this agile research method replicates with changes made with each round of customer feedback, which helps to embed customer insights into the decision-making processes that come with new products, services, or even strategy developments.
Agile iterative testing is typically used most to develop a product or service according to customer need. While the idea is still formulating, this type of testing can include any number of quantitative and qualitative tools, from surveys and online focus groups to the more creative qualitative tools like smartboards so customers can comment on the need and relevance of the product or service at each stage of evolution until no more negative feedback comes forth. Then in the later stages when it’s ready to be beta-tested, research methods such as diary studies can come into their own for more in-depth evaluations over time.
Two-Speed Research for Flexibility
While this is a pretty new concept, a two-speed research strategy could be implemented for improved agility and information gathering on multiple levels through multiple projects all at the same time. This multi-speed method helps get insights in real-time for faster decision making, and will help brands gather both reactive and proactive data.
For businesses, it can be hard to choose whether to prioritise proactive actions or reaction to any change that comes their way. The two-speed strategy means they don’t have to choose, they can use market research to plan both types of action. This is a longer-term research method that runs two streams of research concurrently, and allowing each stream to feed into the other to enhance the relevance and effectiveness of the insights gained. Businesses need to have the right type of technological infrastructure in place in their technology stack in order to implement this strategy, with an insight platform that can run multiple projects at once.
Customer communities are a staple of market research, allowing stakeholders to create a direct connection to customers through a platform designed to spark conversations and discussions that can lead to the most interesting insights. They are vast networks of creativity and endless insights, allowing customers to work together on research tasks and individually when needed.
Brands building customer communities often reap the benefits of having a dedicated source of continuous insight generation at their fingertips, and the tools they use within this community can evolve as needed to make sure the insights the community produces is relevant and accurate. Tools such as online focus groups can enhance the connection stakeholders create with customers, especially with the rise in video focus groups which deepen the connection through emotional visual conveyance. Customers who join up to these communities like that fact they can make a difference to brands, and that motivation is a crucial incentive for quality insight generation.
Customer Feedback Loops
Lastly, to finish on a classic research method, customer feedback loops are a good base method of gathering in-the-moment insights. These are typically sent post-transaction to customers who have bought the product or service from the business, and take the form of surveys for ease of data collection.
There are four stages to the customer feedback loop: asking for/receiving feedback, analysing feedback, actioning the feedback, and then closing the loop. Positive feedback is an indication of what the brand is doing right, and negative feedback is an indication of areas that need looked at and evolved. The loop doesn’t just directly impact the growth and evolution of the brand, product, service, or customer experience, it also indirectly impacts other important aspects of a brand, including customer trust, brand perception, customer relationship management, and marketing/sales/research success rates.
While stakeholders are seeking to become customer-centric, there are a number of mistakes they’ll need to avoid as much as possible:
- Becoming obsessed with customers they’re serving — as explored previously, developing an obsession means to take the word of the customer above all else rather than integrating the voice of the customer into existing business decision-making processes. Taking customer data and basing decisions off that and nothing else might lead to success in some things, but it could also be detrimental to existing strategies and the brand. As Amazon can attest, being customer-obsessed has led to their success, but they are suffering in other ways to maintain this success.
- Being too lax and making decisions based of company and profit-led data rather than customer data — this way of running a business is a product of a bygone era, kept alive by those who look back to ‘tradition’ rather than look forward to innovation. Making decisions based on previous business experiences, profit-led data, or even gut feelings are still too common, and can undo all the work that it took to get to where the business is today.
- Customer service doesn’t always produce the best data as it is the firm’s view of customers, market research gathers data detailing the customers’ views of the company, which is the more accurate reality.
- The firm stops engaging with customers once a sale has been made — there is a lot more value to be had out of a customer-business interaction after the sale is made. Once businesses start communicating more with customers after the initial transaction they will start to see more repeat customers and more loyalty in return.
How will your brand build customer centricity into the heart of your operations? That question is up to you — but this guide should give you a helpful starting point, and a warning about some of the common dangers to avoid.
This blog was originally published on the FlexMR Insights Blog, and can be accessed here.