Through the Eyes of the Customer

View Every Transaction through a Lifetime Value Lens

One of my favorite Peter Drucker quotes is "The purpose of a business is to create a customer, and to grow that customer."

No one will argue with that.  But the problem is, many people - particularly commissioned sales people - allow the transaction to obfuscate the customer.  That is, people inside the business can become overly-focused on the transaction - the sale of the day - and less so on the long-term relationship with the customer.  As a result, customers are often not treated as you might a life-long partner, but rather,  a shorter term relationship, or worse, a one-transaction stand.

Earlier this week, I was listening to a podcast while out on a bicycle ride (hey, it was safe - there was virtually no traffic on quiet quiet coastal byways!).    Coincidentally, this "Blog Talk Radio" podcast by  featured Chris Zane, the founder and CEO of Zane's Cycles  which has achieved an average annual growth rate of 23% annual since 1980 when it opened.  

There were plenty of lessons in the podcast,  but one that really resonated was the way that Zane gets his employees to  look at every customer in terms of their lifetime value to the business, instead of the the value of the single bicycle they buy on a given day.

According to Zane, the average customer will purchase $12,500 worth of bicycles over the course of  their lifetime.  Zane, through a series of customer-focused tactics, is committed to have each of those bicycles purchased from his store in Connecticut.

So, when employees are  hired and trained, they are taught to treat every sale as if that sale is a $12,500 sale.  Now, that would be a HUGE single sale for a bicycle shop, so when an employee sees a sale through that lifetime value lens, they're more apt to treat the customer like gold.

What is  the lifetime value of your average customer?

Can your employees recite that figure coming out of a sound sleep?

Do they engage each customer from that  perspective?

Zane's has achieved a 23% average annual growth rate every year, since they opened in 1980.  Do the math - that's powerful stuff.  And so is the Customer Lifetime Value Lens, if every one of your employees looks through it.

 

How LL Bean has grown by catering to the customer

When companies pay attention to their customers, and offer an experience on the customers’ terms, the customers pay them back.  Over and over and over.

When Leon Leonwood Bean began making and selling boots in Freeport, Maine back in 1912, some customers would bring the boots back to Leon, if something wasn’t quite right.  Leon always gladly accepted the returned boots, fixed them, improved them, replaced them, or gave the customers their money back. 

Whatever the customer felt was fair.  No questions asked.

While the business grew to become a 1.5 billion dollar outfitter with customers around the world, LL Bean has never wavered from its focus on the customer, and more specifically, the practice of doing things the way the customer wants; providing the experience that the customers asks for.

Three strategic decisions in LL Bean's history show why doing what's right by the customer, is also good for business:

1.       The no-questions-asked return policy.
It's the hallmark that made LL Bean, well, LL Bean.    If the customer's not happy with what they bought, refund, replace it, or fix it.  Don’t hassle the customer.  Make their lives easier.

2.       More retail stores.
From 1915 until around 2000, LL Bean had only one retail store.   Around that time, many companies began to close their brick and mortar operations to save on costs, and migrated to more on-line business.  LL Bean began to do just the opposite – they opened more retail stores  in the US,  as well as Japan and China.   

 
Loyal LL Bean customers loved to visit the famous retail store in Freeport, Maine.  So Bean made  their customers’ lives easier by bringing the retail store to the customer.   They opened stores in geographic locations there were high concentrations of loyal catalog shoppers.  So again, LL Bean made things better for the customers, by bringing the beloved Bean retail experience right into its customers' backyards. 

3.      And now, Free Shipping.
On March 25, LL Bean announced year-round, no-strings-attached free shipping.  According to the Portland Press Herald, and David Fuller of LL Bean, "In research after research, the customers said, 'This is how we want to shop.'” 

"Three-quarters of consumers say that they will abandon their purchase when they can't get free shipping," according to industry analyst comScore, Inc.

LL Bean responded to the customers by giving them free shipping.  Of course, the financial side of Bean has its motive:  an upside potential 75% more orders.  

Throughout its history, LL Bean has consistently responded to its customers' desires, even if it mean doing things that were, well, the opposite of what other reatailers were doing.  Listening to the customer has clearly been a key to LL Bean's growth in revenue and customers over the years.  

Why don’t more companies listen to their customers, and act on what they hear?

  

Customer stories can make everyone more customer-focused.

Everybody loves a good story.  And the best stories are true stories.  And every customer has one.

Every customer has a  story about how your product or service has improved some aspect of their life. 

When a customer tells their own personal story, and you hear it directly from the customer, you’ll begin to see all customers differently; you’ll see them as real people, and begin to develop a stronger sense of empathy.  And this can have a strong ripple effect.

I used to work in a soup kitchen, where we would feed meals to the homeless people in the city. One particular night after the meals were served, I sat down at a table where five homeless men were quietly drinking coffee.  I asked the man to my left where he was from, and how he found his way to Portland. 

The man told me his story – slowly at first, but as the conversation went on, he opened up, and became more eager to share his story; his background and  how came to become homeless.  I started to see him as a another adult who simply had more misfortune than I.   Hearing him tell his own story caused me to see him differently, and develop a stronger sense of empathy.

Once you hear a person tell their own story, you see them differently, and treat them differently. You feel a connection, a connection you can act on.

So, what does this have to do with improving customer focus?   How can you use it to improve the customer-focus within your organization?

Create a forum where your customers can tell their stories directly to your employees. Invite one or two customers to a weekly meeting with your service team, so they can tell their stories to the group.   If it’s not feasible to have the customers on site, then record a short video, or do something to capture the customer telling their own story. 

Repeat the process on a regular basis, and over time, by  hearing the customers tell their own stories about how your product has made their lives better in some big or small way, your service team will grow closer to the customers, and act with stronger empathy, and sharper focus.

What can the public sector learn from the private sector about managing customer relationships?

Tell me that I have to do something, and I’ll object. 

Tell me what’s in it for me, and I’ll listen.

Central Maine Power began installing digital smart meters last fall.  It gave customers the right to “opt out” of the meter upgrade.  Many did. But now CMP is being publicly criticized for bullying its customers into upgrading their electric meters.   

So while CMP continues with the meter upgrade program, it also has to fix its reputation, and improve customer relationships.

What could CMP have done differently, to avoid this highly-charged situation?   For starters, they could have more closely followed  three basic customer relationship management practices:

1. Educate your customers on the benefits and value.
2. Offer incentives.
3. Capture , manage and use customer information.

What do we mean?

Tell the customer What's in it for Them.
When you want to get your customers to do something, you need to help them understand why it’s a good thing… for them.  While CMP did publicize the benefits of smart meters, the public education process didn’t seem thorough enough; they put a greater emphasis on sticking to the installation timeline, regardless of what their customers understood about the program.   The customer wasn’t at  the center of CMP’s agenda – the meters were first; the customers were second. In the private sector, when a company loses customer focus, they lose customers.  In the public sector you’ll lose your reputation.  Always consider decisions from the customers’ point of view, regardless of your sector.

Offer incentives.
Time Warner Cable prefers to have its customers pay their bills on line, instead of pay-by-phone.  To influence customers to pay on line, they offer a three-dollar savings.    Had CMP done a better gotten a little creative, and  structure an incentive based on their cost savings, they’d face less resistance.    If there’re financial savings and advantages for you, get creative, and figure out a way to create a concrete incentive for your customers to receive some immediate value.

Capture, organize and act on customer information.
CMP gave customers the right to opt out.  Over 2,000 customers did.  But many of them continued to receive letters, and visits from installers to change their meters. Customer preferences should be captured in a customer information system, then used to separate your customers into different groups, so they can be treated differently, based on their preferences. Not doing this is poor information management, and worse, poor customer management.

Whether you’re a public sector organization delivering services to its citizens, a utility delivering power to  those people, or a private sector company selling products into a competitive market, it’s critical to educate your clientele on the value you deliver, make it attractive to your consumer and properly manage customer information.  Doing these things will improve the quality of the relationships, and the benefits that both parties receive.

 
 
 
Thanks to "Long Islander" for this photo, with its subtle green undertones.

M.I.T.'s AgeLab has created a better way to know the customer.

 
What if you could put on a set of clothes that would instantly transform you into your customer, so that you would see things the way your customer sees them, feel what your customer feels, and walk like your customer walks? 

Would you then have a better understanding of what your customers like, dislike, and how to make them more loyal?   

AgeLab, a research center at M.I.T. created a suit they call AGNES.   According to an article in the New York Times, AGNES “is calibrated to simulate the dexterity, mobility, strength and balance of a 74-year-old.”  By wearing the suit, you experience the physiological feelings that are felt by a 74-year old.  Many companies are having their product engineers wear these suits in order to gain a better understanding of how to design solutions for their aging customer.

By seeing what your customer sees, and feeling what your customer feels, you’ll have greater empathy to make the right decisions to serve your customers in ways that will make them more loyal, and make your business stronger.

The concept is simple:    Come up with a way to actually experience what it’s like to be your customer, and you’ll know exactly what you need to do to please your customer.

OK, so what are three ways that you can apply this same principal, short of designing and wearing a body-suit?

1. Be your customer.
   If you’re familiar with the “mystery shopper” concept, you know this approach.  Step on the other side of the counter, and go through the entire customer lifecycle, from evaluating to buying to owning and using the product that you now sell.  What touch-points delivered a positive experience, and which touch points can be improved?  By actually being a customer of your company, you’ll understand first-hand what your real customers feel.
   
   
2. Ask your customer.
   Customer surveys and focus groups are another common approach for finding out what the customers think.  Done right, these can be effective tools for gaining valuable insight about the experience that you currently deliver.
   
   
3. Capture their comments.
   Customers constantly provide feedback, but much of it is never captured.  During a recent post, I described my experience with Continental Airlines, their customer comment sieve.  If you equip your customer-facing employees with the tools to capture feedback when it’s provided, you’ll begin to accumulate a rich trove of real customer feelings that can tell you exactly what you can do to delight your customers.

The best way to know your customer is to be your customer.    
What do you think are the best ways to better know your customer?

   

Thanks to M.I.T. AgeLab for these images of  AGNES "Aging Empathy Suit."