UK: CUSTOMER FOCUS MEANS COMMITMENT TO CONSTANT CHANGE. - The customer is king is an idea to which many pay only lip-service.

by Robert Heller.
Last Updated: 31 Aug 2010

The customer is king is an idea to which many pay only lip-service.

If words were deeds 1994 would be the year of the Customer - and 2000 would usher in a whole century of customer worship. But management science is the study of the gap between verbiage and action: the more lip-service the customer receives, the wider the gap is liable to grow.

Nobody doubts the sincerity of a manager like George Fisher, whose head has just been expensively hunted for Eastman Kodak after his successful motoring at Motorola: he was quick to include, among the fundamentals for such success, 'First and foremost, a focus on the customers, because they are the people who pay the bills ... if you get that right, almost everything follows.' Fisher's statement will attract enthusiastic echoes from managers worldwide, including some who haven't satisfied, delighted, considered or possibly even seen a customer for years. But what does 'getting it right' mean? Without a clear focus, nobody can judge whether 'almost everything' truly does follow. And what about 'getting it wrong'? Does everything else collapse?

If so, all companies are in deep trouble - for nobody gets it right: not if the definition is 100% customer satisfaction. For instance, corporate users of PCs register only 65% satisfaction with the service they receive - and 70% is satisfactory. Yet these are among the most reliable, best-produced and most productive devices ever made by man. Along with other hi-tech products they have raised the whole level of customer expectations.

Even low-tech manufactures like cars have climbed into a new zone. As Mercedes-Benz has painfully found, today's buyers won't pay a premium for quality alone. In many markets, for consumer and industrial goods alike, quality, however defined, has become a sine qua non. To that extent, the customer is indeed king: although the highest price for poor quality was actually paid, by providers, in the shape of 'rework', 'recalls', 'replacements' and poor customer 'retention'.

The last of these four Rs is the crux of the issue. Polling customers to learn their opinions can deal a devastating blow to corporate complacency. Those managements prepared to correct the revealed defects by systematic improvement will, as Fisher says, find that much else inevitably comes right - though not 'almost everything'. For that, improvement must take place within the context of an organisation rethought from top to bottom, from start to finish: except that there's no finish, because the process is circular.

Here the fourth R, retention, provides vital evidence. Measuring customer satisfaction will show companies where they stand (or run) on the upward-moving staircase of expectations. But the votes that count are recorded with the feet, or rather the cheques. How many businesses know the scale and cause of customer loss, or have ever costed the profit lost through customer churn? As David Perkins of Loyalty Marketing Services points out, 'Typically, it costs 90% of the gross margin on an existing customer to go out and get a new one.' Just as important, how many would-be customers are frustrated by poor performance - for instance, people coming into a shop intending to buy? One retail study, by Jacques Horovitz of MSR, found a horrifying answer to that question: 40%. In my new book, The Quality Makers, Horovitz describes how his long-term work at Club Med sprang from a similar discovery: holiday-makers, attracted by very costly advertising were not coming back enough.

Club Med has made mighty strides since then: but while it epitomises the customer-led business of Fisher's ideal, it does have an advantage: living, breathing customer contact, day-in, night-out. The ultimate logic of Fisher is that all companies should try to replicate that environment. The ultimate reality, though, is that people inside companies don't only face outwards, and can't. The customer pays the bills, but not the wages: that is, decisions on promotions, powers, positions, perks, punishments are made internally.

The practice of internal politics, in most companies, heavily outweighs the theory of putting customers first and foremost. Merely look at today's endless spate of corporate commotions. Take just rail privatisation, the Lonrho war between Tiny Rowland and his hand-picked Thomas a Becket, Ferranti's £-a-share disappearance into GEC, Invergordon's gulp-down by Whyte and Mackay, the proposed four-day week at VW, even the boardroom coup that preceded Fisher's head-hunting at Kodak. Where does the customer figure?

If the upheavals result in greater efficiency and lower costs, the customer can but benefit. True - but that's a million miles away from customer focus that runs through the organisation in a never-ending circular flow. That demands commitment to constant change as the customer - endlessly wooed by others, periodically shifting in requirements - calls the tune.

That commitment is hard enough even in a greenfield organisation like National Westminster Life Assurance. In its first year of trading this company, built from minute zero on a total quality philosophy focused exclusively on the customer, has soared up the league of UK insurers; it's expected to end year one in the first dozen or so.

What can be done on a virgin battlefield, with an army composed entirely of volunteers, far outranges the immediate possibilities of a long-established organisation like NatWest Life's banking parent. Established corporate armies have old lags, conscripts and some soldiers who, perhaps for the most high-minded of reasons, are conscientious objectors. For the established, Fisher's dictum needs reversal: 'Once you focus on the customer, almost everything looks wrong'.

It takes a brave, rare top management to vacate its throne, and set about changing everything, with the willing help of all its colleagues, so that the customer can rise to kingship. But until this happens, customer satisfaction at large will probably stay around the PC service mark: just below the acceptable - 6.5 out of 10.

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