Customer-first strategy | This is why you should adopt it
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Customer-first strategy | This is why you should adopt it

Date
May 13, 2020
Tags
Customer-first
Author
Andrea Mrša
Reading time
12 min

Putting your customer first may sound like a simple and even a bit obvious phrase. What is there to say? Despite that, we still see many companies not implementing it, even though they might think they do. Putting your customer first doesn’t deserve to become another cliché phrase. Because it isn’t. It is a value providing strategy that can bring you a significant competitive advantage.

What is the customer-first strategy?

Customer-first is a business strategy that puts customer needs and expectations above everything else while creating an exceptional customer experience. Companies that live the customer-first strategy will do the research, identify, and analyze customers’ needs to fulfill them with their products or services.

Customer-first vs product-first

A company can be either product-driven or customer-driven. Product-driven companies will put most of their efforts into creating a great product and then finding the right market. It is believed that, if a product is great and offers value, the customers will come. On the other hand, customer-driven companies will first identify customer needs or challenges and then make a product accordingly.

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The most common example of a product-driven organization is considered to be Apple because they created and launched their products way before anyone knew they needed them. They even have a mindset that a customer doesn’t know what they want until you show them.  Although they are considered to be product-driven, this is the real indicator of customer centricity as well - to recognize a customer’s needs and wants before the customer itself.

No company is 100% product-driven or 100% customer-driven. There should always be a balance between the two because one simply can’t exclude the other.

This customer-centric culture is the foundation of most successful companies. Take Amazon for example. They have a mission to be Earth’s most customer-centric company. Jeff Bezos (CEO) stated that they always reserve one chair at the meeting for their customer. That way it’s easier to stay focused on what really matters - the customer.

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It is easy to get carried away with business plans, numbers, or costs, forgetting who we are doing this for.  Therefore, you should always ask yourself: “How will this decision affect our customers?” In this case, the customer stays in the center of every business decision.

Example of the customer-first approach

The first examples of customer-focus mindset were back in the 1960s with a rise in direct marketing.  Even though you can always find customer-first examples throughout history when there wasn’t an official name. That being said, this model isn’t something new, but there are numerous new ways you can perform this strategy and stand out.

Miracle on 34th street (1947)

In 1947 there was a famous Christmas movie that probably many of you are familiar with. Miracle on 34th street (1947) is a movie that follows Kris Kringle - an old man from New York trying to prove he is Santa Claus. Kris starts to work as Santa at Macy’s after their former Santa was found intoxicated at the Thanksgiving Day parade.

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The store manager instructs Kris to direct children towards Macy’s toy section for certain toys. But when the child approaches him with a  hard-to-find toy that Macy’s doesn’t have, Kris decides to put the customer first, instead. He tells their parents where to find the toy, even if that means they have to buy it somewhere else.

After hearing that Kris is sending their customer to another store, managers are about to fire him. One mother, pleasantly surprised with their “new strategy”, approaches the toy department manager, and tells him that because of that she will become Macy’s regular customer. Not only his job was saved, but they also implemented this strategy in other stores.

Yes, this is a fiction Hollywood movie, but would this approach be beneficial in real life?

Customer-first research [based on miracle on 34th street movie]

To better understand how the customer-first approach would work in real life, there was research conducted based on the principles of Miracle on 34th street (1947).

The research “Nice guys finish first”

In this experiment, participants had to imagine they got a gift certificate to purchase a DVD. In all cases, the DVD was out of stock.

In the experimental group, participants were told that they can get the same DVD at the competitor store. In the controlled group, they were simply told that the DVD was out of stock.

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All participants were then informed that they can either order the DVD from the target store but they would have to wait one week, or they could buy it immediately from the competitor store for the same price.

In the meantime, subjects completed a mood identification scale and an exercise that probed them about sales associate behavior.

Participants were asked how likely they would consider a second purchase at the target store and competitor store. Price was modified to be the same, or 7% higher at the target store.

Next, they were asked about the third unrelated purchases with similar price modifications. Participants were then presented with a scenario where there was a friend’s negative feedback about the target store.

All tasks were separated by various tasks to create cognitive dissonance.

The research results

The experiment showed that customers from the experimental group, where a customer-first strategy was implemented, were more likely to choose the target store over the competitor. Even if they had to wait one week, while the same product was available at the competitors!

Also, their store and store associate evaluations were higher than the ones from the controlled group. They were more likely to make a second purchase at the target store and even counter negative feedback.

Customer-first benefits [Infographics]

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Why do you benefit from putting the customer first?

From a psychological perspective, this could mainly happen for three reasons:

  1. Rule of reciprocity
  2. Mood congruency
  3. Expectation management

Rule of reciprocity

Rule of reciprocity is a social psychology principle that says a person will more likely help you if you helped them. For instance, if you received something from John, you will more likely want to return the favor. In the movie example, Santa helped provide valuable information about where a parent can find a specific gift, so parents were more than happy to return the favor and shop at Macy’s.

This principle is most commonly used in sales. Even though an example from the movie is pretty selfless and inspired by an honest urge to help others, this principle can be often used for other reasons  - to make you respond the desired way.

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You may recognize this type of behavior from certain local street “vendors”. For example, they may see you drinking coffee on a bar terrace. They approach you and randomly put a souvenir on your table without asking for money. And then they leave. If they don’t come back for a souvenir, you will most likely see him circling around and feel obliged to return the favor by paying him back. Even if you didn’t want the souvenir in the first place.

Mood congruency

Mood congruency is a psychological phenomenon where a person tends to remember certain information that is congruent to their mood. (Bower and Forgas 2001). To simplify, if you feel happy, you will most probably remember events or things that made you happy in the past.

If you inspire positive emotions in a customer, they will also respond in alignment with that. Evidence for this was also found in the experiment above when the participants from the experiment group had more positive ratings than their counterparts.

Expectation management

“When one’s expectations based on historical events are significantly different from actual consumption experience, one tends to reexamine their belief and act accordingly.”

Normally, a customer wouldn’t expect a salesman to meet their needs while putting the company at risk. Therefore, when the customer encounters themself in that situation, he can reevaluate their prior beliefs as new attitudes were formed.

In the experiment, participants found the salesman’s behavior atypical (read: not congruent with their expectations). Guess what! They also indicated the sales associate exceeded their expectations.

Is the customer always right?

Michael Aun tells a story in his book “It’s the customer, stupid” about Domino’s pizza in South Detroit. They receive a phone call ordering the same meal every Thursday at around 5 pm (at the time the story was written). The order arrives within 30 minutes, as this is their company’s policy. Every Thursday around 5:30 pm, the same customer calls and complains he didn’t like the pizza. Their motto is: If you don’t like it, you don’t pay for it.

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Even though it is evident that the customer is taking advantage of the company’s policies, he still gets his refund.

When he was being asked about how much it costs them to keep this promise per year, he responded - around 200 dollars. But the free advertising they got because it was worth tens of millions of dollars.

While this sounds like a pretty utopic example, this may not be the case for everyone. It also raises the question to which extent should we go by following blindly “the customer is always right” mantra.

Even Amazon itself, which stands for one of the top customer-first companies, showed that they have limits by banning customers who were abusing their return policy. It is evident that the customer isn’t always right, it is just a question of how far we are willing to go.

Customer first = the customer is always right?

It is important to differentiate customer-first from the customer is always right approach. We’ve learned by now that by following the customer-first strategy, you center your business model around the customer itself. This means you will do the proper research to identify customer’s needs and expectations while creating the best possible customer experience.

But what if the customer is abusing your company’s policy? Is it easier to let them “get away with it” and not risk losing the customer or you stick to your predefined procedures, but you might have a dissatisfied customer or even lose it?

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Here are 4 reasons why “The customer is always right” mantra can harm your business:

  1. employees are placed against customers if the management always value customer’s opinion regardless of the issue and its policies
  2. employees can lose morale and become miserable if they often feel untrusted or rejected by management
  3. difficult customer can take more of your time and energy then they are worth
  4. sometimes it is just not fair to other customers

It is not questionable that the business should always take an extra step for the sake of customer satisfaction. But by blindly adopting this approach you might as well do more damage than you could benefit from it.

5 steps for creating a successful customer-first strategy?

1. Put your employees first

As contradictory as it may sound, to implement a successful customer-first strategy, you need to put your employees first. If the people working for your company are not motivated, they lack a sense of purpose, or they simply don’t feel appreciated, you will have a hard time integrating a successful customer-first model.

“89% of employers think employees leave because of money when only 12% actually do.” (Leigh Branham)

Although salary is an important factor when it comes to choosing whether to stay in the company or not, it is certainly not the most important one. A great work environment, reward, recognition system, and positive feedback followed by occasional “thank you” are the main contributors to employee satisfaction.

Be appreciative, or like Richard Branson would say:

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2. Get to know your customers

We all use different tools and tone of voice when interacting with different people in our personal life. You will call your grandma on the phone, text your mother on Viber, and later you will use Slack to communicate with your colleagues. We intuitively know that we won’t reach everyone the same way.

Same way companies should know who they are selling to - who their buyer persona is. A buyer persona is a profile of your ideal customer, based on research and data of your existing customers.

Knowing your buyer persona(s) helps you personalize your customer first strategy by targeting the right customer base using data like demographics, behavior goals, pain points, and their buying patterns.

Who are your customers in the first place? What do they need? Which problems do they have? How can you help them solve them? These are only a few of the questions you should know the answer to.

3. Be innovative

Lego Ideas is an online community where passionate fans and creators from all around the world bring ideas to reality. On their site, you can wake up your inner child and design your own Lego set. You simply share your design with a community and if it reaches 10k supporters, your idea gets evaluated and eventually launched.

Lego is a great example of customer-first implementation and innovation through customer engagement. Creators get recognition and sales royalty while Lego gets thousands of new ideas annually provided by the community that can’t wait to buy their new product.

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Customer needs are constantly changing over time, so you have to regularly look for new ways to improve your customer experience.

4. Ask for feedback

“Only 1 out of 26 unhappy customers will complain. (Esteban Kolsky)

This means that the other 25 people will simply go to your competitor without a word. That being said, it is important to let your customers know they have a voice.

Asking for customer feedback not only helps you improve your products or services and measure customer satisfaction, more important - it tells your customers you care.  Customers like to know you value their opinion and that you are interested in helping them solve their problems.

Studies have shown that if a customer complains about your service or product, and you manage to solve a problem successfully, they will be more satisfied with you than if there wasn’t a problem in the first place.

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5. Measure Customer-first success

“Only 11% of companies have strong CX metrics programs and 62% of companies cite the lack of taking action based on CX metrics programs as the key problem.” (Temkin, 2017)

After implementing your first customer-first steps, you want to see how that had an impact on your business. This is where customer metrics play a big role. By using different techniques you can identify how your customers experienced your service or product. Having strong customer metrics leads to improving customer experience, increasing customer loyalty, and finally, growing your business.

6 most common customer metrics you should consider using:

  1. Net Promoter Score
  2. Churn rate
  3. Customer satisfaction
  4. Customer effort score
  5. Customer lifetime value
  6. Retention rate

It is not necessary to use all customer metrics to gain insight, only ones that are relevant to your business. It is better to put a focus on the quality and relevance of the insights then using too many metrics without the proper understanding of what to do with the results.

Conclusion

A customer-first strategy can be extremely beneficial for your business. Not only it helps you improve your customer experience and overall satisfaction, but it also improves your customer retention rates and loyalty, which ultimately leads to increased revenues.

Customer-first has to become the culture of your brand. Something you want to be recognized for. That’s why it is crucial to adopt this model not only by management but, more importantly, by first-line employees. When taking your employees’ best interest in mind, you are putting the customer first. Get to know your customers, always ask for feedback, and never stop improving. And remember - To give is to receive.

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