Only a producer society can give consumers what they want
21 October, 2013
Boy, I’m falling out of love with ‘customer-centricity’.
I embraced it, like everyone else, not just because the idea of customers getting decent service and value in exchange for their hard-earned cash just seems like common sense, but also because the single-minded pursuit of shareholder value had been such an obvious and abject failure.
The concept famously advanced by Milton Friedman – now widely known as “the world’s dumbest idea” – had spectacularly failed to drive improved outcomes, either for customers or – ironically – for shareholders.
But now I worry we’re getting ourselves into an even bigger pickle.
And I’m beginning to think marketing people are to blame.
Part of this is down to what Deloitte have called the ‘Big Shift’ – an apparent conundrum in which return on capital invested has fallen relentlessly since the 1970s even though productivity has more than doubled over the same period.
Deloitte’s theory is that customers have got the jump on corporations.
They’re technology enabled and so they can compare all the offers on the table in real time.
More often than not they know more about the product or service that they’re considering than the distribution channel selling it, because of the research they’ve already done (new business-to-business research suggests that 70% of the purchasing decision has been taken before the customer even touches the company making or selling the product or service).
Finally, their expectations of product delivery and levels of service have been rising exponentially as people compare their experiences – and certainly faster than companies are able to innovate or improve.
Companies are increasingly reliant on creative (expensive) employees to drive the improvements in customer experience that they believe are key to maintaining market share – which puts even more pressure on margins.
“Well, that’s a pisser for the corporations,” I hear you cry, “but at least the customer must be getting more of what they want and at less cost to boot”.
But if the customer is indeed king – it’s a very constitutional monarchy.
Because actually there’s almost no evidence that customers are more satisfied with what they’re getting.
And there’s plenty of evidence that exactly the opposite is true.
I blame professional marketing people. I blame the research companies they use. And I blame their bosses and the people who hold their purse strings for lacking the conviction of their predecessors.
Most of all, I blame the quarterly reporting public ownership culture, and super-computer driven trading optimisation algorithms that set more store by short terms results than long-term vision.
Here’s what’s happening in this increasingly vicious circle (IMHO):
Margins are under pressure, ergo business models are examined.
Patterns of increased customer dissatisfaction and purchase promiscuity are discovered.
Customer research is conducted using quantitative (quite dangerous) and qualitative (very dangerous) surveys.
Please note: all the competitors are going through the same process, using the same process and the same methodologies. They’re also asking the same customers.
They’re also (of course) getting the same answers.
So they do the same things:
Process improvements (which costs money)
Staff recruitment and training (which costs money)
Product and proposition innovation (which costs money)
Soon the customer has got what he or she said they wanted. And they have plenty of people to buy it from – because they’re all the same.
So margins remain under pressure and business models are re-examined.
More patterns of increased customer dissatisfaction and purchase promiscuity are discovered.
More customer research is conducted.
And so on.
Why does the customer remain dissatisfied, when his or her needs are being so slavishly satisfied?
The first part of the answer is that customers don’t know what they want. And so there’s no point asking them.
Henry Ford is supposed to have said, “If I had asked people what they wanted, they would have said faster horses.”
Later on David Ogilvy put it even better, from a marketing perspective:
“Consumers don’t think how they feel. They don’t say what they think and they don’t do what they say.”
But actually the answer goes deeper.
Psychological and social research reveals that satisfaction depends as much on the have-nots as it does on the haves.
Humans turn out to be significantly more loss-averse than they are acquisitive. And these tendencies ossify as age increases.
Other studies show that miserable people remain miserable when their circumstances improve and happy people are stoic when their luck fails.
It’s all about relativity.
A broken nail can ruin a whole day in downtown LA, whilst many an African woman can consider herself very fortunate indeed if only half her offspring die before their fifth birthday.
Equality seems to be such hell for humans that even the most idealistic communist and egalitarian societies quickly introduce their own hierarchical conventions.
How to escape? Grow some balls.
Businessmen and women need to grow some balls. They need to stop asking people what they want and just do what they feel is right to the best of their ability.
They need to remember that the secret of success in business, just as in art and negotiation, is to charge a great deal for something that costs you very little (most businesses at the moment appear to be increasingly predicated on the precisely opposite notion).
Investors need to grow some balls and invest in the ideas that show genuine vision for the future – recognising that some (most?) will fail, but the ones that succeed will enjoy spectacular growth and high margins, whilst they last.
Most of all Marketers need to grow some balls and to stop doing everything by rote. They need to recognise – or rather remember – that needs and desires can be created far easier than they can be satisfied. And that weakness can be spun into strength simply by a change of emphasis, of environment – sometimes just through the passage of time.
By Malcolm Gladwell’s reckoning David was never the underdog. We should sympathise instead with poor old Goliath, whose size, strength and heavy armour equipped him to deal only with enemies of a similar stature, fighting in a similar way.