In a previous article about focus on the customer we discussed how putting the customer in the center of your company can help you become a well-organized company. We also explored in another article how focus on the customer can be your guide to empowering your employees to act in a way that retains your customers and protects your interests. What may not have been crystal clear in either article is the crucial reason why focus on the customer is so important.
Ever since the introduction of row agriculture, when man was first able to consistently produce a product (the turnip) in abundance beyond his needs, there has been a ‘marketplace’ – i.e. producers, sellers, and consumers. The size and shape and kind of the marketplaces have changed dramatically over time, but there are two maxims that were true then and are still true today. Maxim One, there will always be someone in the marketplace who will be able to produce a better product than you can, or sell it more cheaply than you can, or promote it more effectively than you can, or do all three! Maxim Two, every market, and the products and services in that market, has a lifecycle curve from inception to obsolescence. In layman terms, if you are in a market now or trying to enter an emerging market, you are constantly faced with a host of formidable competitors.
Economists will tell you that competition is healthy for the economy because it favors innovation and keeps prices low and service high. What that don’t tell you, and hope you implicitly understand, is that the way this comes about is that each of the companies in, or attempting to enter the marketplace, are trying to develop a competitive advantage over all of the other suppliers in the market. They are trying to develop a sustainable competitive advantage that will allow them to take advantage of the market lifecycle when it is profitable. You have probably had these same discussions many times. For example, “If we develop a new technology we will either leapfrog the competition or create a whole new market.” Perhaps you are thinking, “We’ll lower our prices and gain a greater market share that way.” Maybe you believe that developing myriad sales channels and heavy promotion will help you beat back your competitors and dominate the market. The problem lies in marketplace Maxim One. Technology, Price, and Promotion are not sustainable advantages because there is always someone who will technologically leapfrog you, who will sell it cheaper, or who will outdo your promotion. Eventually, the technology research costs too much, the profit margin becomes too low, the selling and marketing expenses too high and your plan fails.
There is one, and possibly only one, sustainable advantage – focus on the customer. Customers still place a value on a relationship with a company; enough of a value to help you ward off the discounters who don’t nurture that relationship. Satisfied customers tell you what they need, and if you are focused on that, they give you the early optics to emerging and new markets so that your innovations aren’t wasted in leapfrogging in the wrong direction technologically. Finally, customers who believe they are the focus of your company are loyal; they are 5 times less likely to be persuaded by your competitors’ promotions than are dissatisfied customers.
Focus on the customer is a very small investment compared to the research to develop technically superior products, or the discounting required to be the low price leader, or the sales and marketing expenses of a high powered promoter. It simply takes the right culture, with the right tools, empowered with the right attitude. Put the customer in the center of your Customer Relationship Management system for a sustainable competitive advantage.
This blog was written by Jim Lindenfeld, who has been actively involved in customer relationship management during his entire professional career. He is a certified sales and sales management trainer. He has been involved in the implementation of CRM systems since 1987 and is currently a principal consultant in our CRM practice.