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10.13007/413
Ideas for Leaders #413
How to Be a Customer-intimate Company
Key Concept
Customer-intimacy is the ultimate customer-centricmodel, resulting in long-term relationships with themost valuable and profitable customers. It’s not easyto achieve, however. For most businesses, becomingcustomer-intimate is more of a transformation than atransition. The first step involves a reversal of thenormal ‘logic’ of business — and the next a significantorganizational change.
Idea Summary
Around 20 years ago, academics and consultantsMichael Treacy and Fred Wiersema identified three‘value disciplines’ or models followed by top-performing companies: operational excellence,customer-intimacy and product leadership. Thesecond, essentially an advanced form of customer-centricity, is usually the one that’s hardest to emulate.
One of the difficulties with the customer-intimacymodel is that it reverses the ‘natural logic’ of business.Customer-intimate companies put people beforeshort-term profits. They see making money assomething that ‘happens’, a by-product of service.They take a relational rather than a transactionalapproach — and this has implications for the waythey’re organized and run.
Research by Vlerick Business School has identified aspecific set of activities common to most successfulcustomer-intimate businesses. These activities can begrouped under five sets of processes managers mustmaster to make strategy work. The main ones areoutlined below.
Direction and goal-setting processes
In the customer-intimate company, the servicephilosophy starts at the top. Leaders make sure thatevery employee — whether they face the customer ornot — understands the ‘value proposition’. Theyexplain customer-centricity clearly — and they lead byexample, listening to customers, talking to and visiting
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Authors
Verweire, Kurt
Institutions
Vlerick Business School
Source
Strategy Implementation
Idea conceived
May 2014
Idea posted
July 2014
DOI number
Subject
Competitive strategy
Change Management
Customer-centricity
example, listening to customers, talking to and visiting
customers, and sometimes taking direct action tosolve customers’ problems. They encourageemployees to help ‘screen the market’ and reportchanges in customer behaviour and preferences.
They do not, however, treat all customers equally.Their approach is relational — but also pragmatic.They focus on the 20% of customers who generate80% of revenue and who are open to a long-termrelationship.
Operational processes
Customer-intimate companies manage their internalknowledge base and customer complaint andfeedback procedures effectively and they rewardcustomer loyalty. They have processes that create avirtuous circle of knowledge and trust. The moreknowledgeable the company, the greater thecustomer’s faith it will deliver what it promises — andthe greater the customer’s faith, the more open theyare to dialogue that builds customer-relevantknowledge.
Evaluation and control processes
Customer-intimacy requires metrics. KPIs mightinclude net promoter scores — customers’ willingnessto recommend the company to colleagues andfriends. Customer-intimate companies will alsomeasure potential ‘customer lifetime value’.
The results of satisfaction and retention measuresshould be discussed with employees and corecustomers. This will create opportunities to improveservice.
Satisfaction and retention scores can also be used tohelp decide bonuses for managers and sales andservice staff. Linking them to compensation willconfirm customer intimacy at the core of thecompany.
Support processes
Customer Relationship Management (CRM) is the mostobvious supporting tool. There is good CRM and badCRM, though.
Companies need to make sure their databases areeasy to access and regularly updated — and, crucially,that they include customer-specific information aswell as transactional data. They will also need to usethe data smartly. Customer-intimate companies haveguidelines for how many times to contact thecustomer and through which channels.
Organizational behaviour processes
The organization and its HR policies need to reflectthe operating model. Customer-intimate companies:
Make ‘attitude towards the customer’ a hiring criterion.
Invest in staff training and retention. (High staff turnover is not
conducive to long-term relationships.)
Create teams or account managers that take responsibility for
customer accounts.
Give prizes to employees who ‘go the extra mile’ for customers.
Business Application
The activities summarized above align theorganization for customer-intimacy and create thecontext — the collaborative culture — in whichemployees commit to making customer-intimacywork.
Examples of customer-intimate companies crossindustries and sectors. They include the online shoeand clothing retailer Zappos, the Danish bank JyskeBank, the packaging specialist Tetra Pak andChâteauform, a hotelier specializing in residentialseminars.
They share the same competitive theme and valueproposition — customer service and connectivity —and they unite their organization and people aroundit.
One of their defining characteristics, perhaps, isimagination. A customer-intimate company has theability to empathize, to imagine what it’s like to be inthe customer’s shoes. It listens to the customer — tounderstand them, not to sell to them. And it’sprepared to think ‘outside the box’. It might, forexample, work with other companies to combineknowledge or recommend a solution that includes acompetitor if it believes it to be in the best interests ofthe customer.
A golden rule of customer-intimacy: avoid self-orientation.
© Copyright IEDP Ideas for Leaders 2014
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Further Reading
Strategy Implementation. Kurt Verweire. Routledge(2014).
Further Relevant Resources
Kurt Verweire’s profile at Vlerick Business School
Vlerick Business School's Executive Education profile at IEDP
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