Does Every Company Need a Customer Strategy?

By 1to1 founders and authors Don Peppers and Martha Rogers, Ph.D.

It's rare that any one firm can be all things to all customers. Not every enterprise considers a customer focus part of its core competency, but that doesn't mean that such enterprises can't benefit from a customer strategy. The fact is, every customer
wants three things from the companies she does business with: a great product, good value for the price and good service. That's why every company needs a proper balance of the three core competencies defined by Michael Treacy and Fred Wiersema in their landmark work, "The Discipline of Market Leaders”: Operational Excellence, Product Innovation and Customer Intimacy. Whichever discipline gets the larger focus sets the core competency for the firm. But they all require a customer strategy fundamentally designed to grow the value of the customer base.

For instance, product innovators need to foresee the future, and a customer strategy
that will help meet the needs of the Most Valuable Customers to seed new product lines. The goal is to build a better product -- one that meets the specific needs of certain customers -- and to bring that product to market faster than the competition. ROI comes from improving those processes that create a Learning Relationship with each product user and accelerate product enhancement and innovation, making tailored communication possible.

Competitive advantage through operational excellence
Companies that derive competitive advantage from operational excellence design their business models to improve the scale of their firm. Through process redesign and continuous improvement, the operationally excellent company eliminates unnecessary products and services in an attempt to streamline the customer-service cycle, providing end-to-end product delivery. Extraneous activities are minimized to concentrate on driving costs down while maintaining quality.

For an operations-based enterprise, a customer strategy helps align resources, prevent unnecessary communications and identify unprofitable customers. For example, a firm could reduce costs by discontinuing free services to lower-value customers, or it could encourage a customer to behave differently to allow the company to handle its transactions more efficiently, perhaps by moving service from the phone to the Web. With a customer strategy, these firms can enhance their ability to deliver as promised to customers. Operational excellence improves as a result.

Wal-Mart is a prime example of a firm that uses operational excellence to create customer value. By investing in innovative optical-scanning technology, Wal-Mart improved the efficiency of its checkout process (increasing first-pass scanning accuracy) and boosted customer satisfaction at the same time, saving time for busy customers.

Increasing product scope
Customer-focused firms, on the other hand, seek to increase the scope of their relationships with customers, making available a range of products and services designed to provide integrated interactions with customers across the enterprise. Customer-intimate firms may not have the most innovative products or the lowest prices, but their customers find that the overall configuration of products and services is tailored to meet their own unique, individual needs.

Customer intimacy
Companies that focus on customers can increase the value of their customer base by identifying those who are most profitable and building trusted advisor relationships with them to maximize profits. Nordstrom, for example, is legendary in the retail business for its attention to customers' individual needs. Instead of categorizing departments by merchandise, Nordstrom created fashion departments that fit individual lifestyles. The retailer's best customers benefit from Nordstrom's "Perpetual Inventory" initiative, which provides the "right product, at the right place, at the right time." Nordstrom respects its customers' communication preferences, and, in the process, has increased its cross-channel marketing capabilities.

So, does every company need a customer strategy? Yes, but in different ways. In fact, different companies in the same industry may have different approaches, and therefore will require very different customer strategies. That means your company needs to be wary of anyone trying to sell you a "vertical" solution that's meant to apply to all the companies in your industry. Executing a customer based business strategy can improve competitiveness, regardless of the core competency of your business.