By Don MacRae First it was the Old Economy, then the New Economy, then the Internet Economy. And whatever you do, don't forget the Information Economy. What's next? The Customer Economy. Yes, after steadily gaining influence for the better part of a decade, the customer is now firmly in control. The question corporate leaders are starting to ask themselves is: How do we win under the new rules? The answer, which has nothing to do with cash flow, is ETDBW, meaning companies must be "easy to do business with."
What is the Customer Economy? Thanks to the Internet and a variety of wireless devices, customers have access to most businesses at any time, from any place. No longer are they locked into a single option when it comes to getting whatever they want. Moreover, what customers want is a little more sweeping than in the past. They're looking for good service and innovative offerings, and are demanding better pricing (no more 90% margins), distribution, and product design.
If these demands aren't met, they'll leave -- quickly, quietly, without remorse, and with a backward glance that says: "You just don't get it." In short, customers have power, and they know it. For companies, it's time to start paying attention.
NEW VALUATION. Part of what's driving this revolution is the way a company's value is measured today. Patricia Seybold, author of the recent book The Customer Revolution, argues that the historical measures of business success built around investment capital -- such as profit and loss (P&L), return on assets (ROA), return on investment (ROI), return on capital employed (ROCE), and even price-earnings ratios (p-es) -- are no longer the most important performance indicators.
In the Customer Economy, loyal customer relationships are the fundamental source of value. Because the worth of your customer franchise will ultimately determine the value of your company, this customer capital (the sum of the worth of all present customer relationships) is now more important than investment capital.
As a result of this transformation in thinking, corporate leaders are focusing on customer metrics: retention, satisfaction, and growth, along with increases in customer spending and predictions of defections. If this isn't happening in your organization, get ready for those "You just don't get it" looks.
GO TO THE SOURCE. The key to maintaining customer loyalty is pretty obvious: It's to make sure customers have a positive experience with your products and services. Successful organizations such as Hewlett-Packard have identified high-level executives who "own" the total customer experience for the organization, across all units. They're responsible for establishing customer-experience goals and for measuring, monitoring, and continuously improving customers' interactions with the company.
One of the tools I have successfully used to move organizations toward improving the customer experience is the Customer Advisory Panel or Council (CAP/C). They can comprise both external and internal customers and are most effective when the leaders of the organization participate.
Here's how they work. Corporate leaders identify a significant number of key customers (10 to 15) and invite them to join a CAP/C for a period of 12 to 24 months. Participants should represent a spectrum of your business partners. They should be decision-makers who want to work with you to improve their own revenue and profitability by improving your products and services.
GET TO KNOW THEM. The mission of the CAP/C is to deepen connections with your key customers in order to align your strategy, products, and service with their changing needs. The objective is to learn to be "easy to do business with" -- and to enhance your partnership. The council should evaluate and provide feedback regarding products and services, identify ways to provide innovative customer service, and explore present and future business and industry trends.
Once you have the CAP/C members on board and your first meeting scheduled, have a facilitator interview each member. Determine how they view your company's strengths and weaknesses, what they see as the key issues to be resolved to make their experience as positive as possible, and any other issues they would like to discuss.
Hold a social get-together -- a ball game or a golf outing -- the day before the CAP/C meeting. Remember that the keys to customer loyalty are relationships and a positive experience with your products and services. The social outing should start to build a foundation of trust and support that will be tested during the next day's meeting dealing with key issues in the relationship.
ASSIGN AN OWNER. You'll find the council meetings both rewarding and challenging. The rewards will come in the form of stronger business relationships, faster resolution of problems and identification of opportunities, and the creation of a lasting alliance that will help all participants over time. Disagreements? Pass those to the facilitator, who should suggest solutions.
There's little doubt that Seybold is right: We're in the midst of a "customer economy revolution." To win under the new rules, corporate leaders will have to redesign their businesses to meet customer demands and measure what matters most to the people who hand over their money.
Start by deciding who in your organization will "own" the total customer experience. Have that person organize your customer council. If you haven't already joined the revolution, let this be your wake-up call. MacRae is president of the Lachlan Group, a management consultancy in Toronto. He has taught and worked with corporate leaders for the past 25 years