Saturday, March 19, 2011

Shifting from a product focus to a customer-centric focus

In the e-commerce business world, a customer can switch to a competitor's product with a click or two on a Web page. A customer-centric focus—the best means of building lasting customer relationships in both the traditional and new ways of doing business—has become absolutely imperative in the new business economy, but shifting to a customer-centric approach is not a straightforward process, nor is it a natural one. The reason for this is that, in general, businesses are launched on the basis of a unique product or service. Initially, the focus is on building that product or developing that service and informing the marketplace of its availability and desirability. When another company eventually begins producing and marketing a similar product, the original company loses its competitive edge.


At this point, companies adopt other strategies to regain the competitive edge they had when they had a unique product or service. They begin streamlining operations to produce the product better, faster, and cheaper. But improved performance is a short-lived advantage because the competition inevitably applies the same strategy, resulting in a leap-frogging process common to many business sectors. Customer relationships then become more important than simply building a good product or delivering good service. Building good products is often easier than building good customer relationships, and although product quality is still important, it is no longer the key to sustainable competitive advantage when the competition's products are just as good. In the long term, the organization with the best customer relationship strategy will win out. And the call/contact center has to be a primary conduit for this strategy. (see Figure 1)

 
Figure 1: Maximizing the value of each customer interaction.

Becoming customer-centric—that is, shifting from marketing products to building lasting customer relationships—is, as we have said, an evolutionary process. It cannot be done overnight and usually requires a major change in corporate culture. A fully customer-centric organization has the ability to successfully manage customer knowledge. Product-focused organizations use sales data primarily to report on progress in reaching financial targets. A customer-centric organization, on the other hand, stores, analyzes, and uses sales, billing, service, support, and other data in an ongoing relationship with customers to accomplish the following objectives:
  • Forge personal relationships
  • Increase staff awareness of customer importance
  • Improve the product development process
  • Deliver value-added service better than competitors

Customer value

Transforming customer knowledge into customer value can create a significant competitive advantage. For example, when high-value customers are identified and their needs anticipated, new value is created for them where it did not exist before. Ultimately, customer-centric organizations build customer loyalty, a customer response characteristic that leads to higher profitability. There are several ways organizations can categorize customers by their "value." Tracking revenues, cost, and profitability is not the only way to assess customer value. Another, more advanced method of evaluating customer value is by assessing their value potential, which has been defined as the willingness of customers to participate in the creation of products and services, sharing with them information and other resources and sharing control over the design and production of products and services.

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