The Customer Religion

The Economic Times - November 2001

A business leader with a wry sense of humour recently observed that since the main reason being given by almost all businesses for slow consumer sales was the delay in the festival season and the fewer auspicious dates for marriages, the Hindu calendar should figure as a key variable for annual sales forecasting. I guess a corollary to that is that one of the key routes to stimulating market growth would be to lobby with the Hindu high priests and persuade them to be a wee bit more market friendly in their interpretation of the stars! Having determined that astrology and sentimentality (of the consumer confidence kind) can't be cured in the short term at least, corporate speak is now about surviving and emerging stronger from this continuing slowdown, through "better customer understanding" and "innovation". I would have felt a lot better if the connection between the two were made more explicit as in "our plans are to obtain and use superior customer understanding to innovate new kinds of offers that customers find more acceptable than competition offers or than not buying at all".

However, despite the buzz about 'customer understanding', the true journey into this realm hasn't even begun for most Indian companies. In this column, I want to strongly flag this gap between intent and action, because I believe that the only thing that can fight slowdowns and stimulate consumer demand, and the only thing that can fight newer competition effectively, is a business strategy based on superior customer understanding. I deliberately use the term business strategy instead of perhaps the more accurate phrase 'market strategy', because there is a fairly widespread belief that market strategy is different from business strategy, when in reality it is one of the key components of it. And often the business strategy development process, whether done internally or externally with consultants, does not devote the time, attention and effort needed to create the backbone of customer understanding on which the strategy will rest. My guess would be that less than 20% of energy goes into acquiring breakthrough, or at least robust consumer understanding. It is easier to say "the market will grow as determined by the thumb rule of GDP per capita and consumption relationships of say, Timbuctoo", rather than develop a zero base model of what will drive penetration of this product in India or the consumer logic for why the structure of the product - market will change or not.

Most companies still think about their businesses in a totally product centric fashion if their public statements and media interviews or discussions in management committees and board rooms are an indicator. (Next time, just count the number of times the term 'customer view' figures in the discussion, relative to other terms). Many industries still work with the implicit model that demand generation is the dealers' responsibility not the company's. It is a bit like the relationship used to be between the Viceroy and the Queen of England. Queen Company doesn't really care where the sales are coming in from or why, because that is what the Viceroy dealer is supposed to do. It is only when he doesn't or cannot, that this absentee landlord model gets reviewed.

Customer Understanding is often thought of as something that the marketing department needs to do to figure out how to price better or advertise better or get feedback on product performance. The notion that customer understanding is the gut of a business and will determine all aspects of business behaviour is yet to get truly internalized. Top management needs to think of consumer understanding more as a religion than as an abstract piece of ritual, or a complex art form. It really is as prosaic as accounting. Very simply, no matter what the business is, aerospace or candy, the core of customer understanding is to actually figure out how exactly people/ buying units are behaving and why they are behaving the way they do. And the only way to define the canvas of people / business units is "everyone who could potentially value the benefit that you will provide. The answers would lie in two places: One, what is happening to customers in their lives / their businesses and how they are managing it. (Many B2B marketing companies confess to spending infinitely more time talking to customers about their own products and how much of it the customer wants to buy, rather than discuss in depth what is going on in their customer's business, and the customer's market strategies for his market). Two, how do customers really process the value they derive from different options available to them. (Ironically, the stated Mecca of all businesses is to improve customer perceived value, but it is usually done without spending too much time on building a clear and robust customer value processing model!) And related to this, what do customers think about value delivered by all possible options, not just those we believe are competition products, but all options available including the 'do nothing' or 'do not buy' option.

Many companies believe that being customer centric is about just asking customers about what they want and then figuring that there is no way anyone can make this happen at a profit. As another business leader, a reluctant espouser of the customer religion, once said to me "being customer centric is all very well, as long as you are prepared to sacrifice your profit". But being customer centric is not about making your customer the marketing director or the pricing manager of the company. It is about really knowing who is buying and who is not buying (the category, the product type, the brand or source of the product), figuring out why they are buying or not buying what they are buying (are they using / doing something else, have they no need for it, have they a need but haven't realised they have a need for it), and understanding all aspects of why different types of customers buy and why they don't, what and how they use it for and what they don't. Most importantly it is about figuring out how to use all this to create the 'killer app' (to borrow an out of fashion but evocative phrase from the dot com era) which can drive top line growth.