Online Extra: The Key: Catering to Customers
The main message to come out of BusinessWeek's second annual ranking of Europe's best 50 companies is this: Enterprises that know what their customers want and can provide it efficiently outperform their rivals. That's as true of a huge natural-resources conglomerate like London-listed BHP Billiton (No. 2), which is known for its competitively priced quality products and timely deliveries, as it is for Swedish clothes retailer H&M Hennes & Mauritz (No. 37), which wows fashion-conscious young women with chic clothes at knock-down prices.
"The top firms are obsessed about what their customers want," says Sean Meehan, professor of marketing at the IMD business school in Lausanne, Switzerland. "They know that clients value companies that give them what they promised they would on time." The result: bigger revenues and fatter profits.
Among the companies in the European BW50 that Meehan particularly admires is British food retailer Tesco (No. 12), which he says is "way up there" because of the efforts it makes to find out what its customers want. Tesco mines the huge amounts of data it collects through its Clubcard loyalty program to discover trends in taste and fashion just as they're beginning. And it regularly interviews Clubcard members over the phone and polls them through written surveys to determine their shopping preferences. One discovery: Customers want more information than they have traditionally been given about the contents of the food they buy.
KEEPING IT SIMPLE.
Meehan also likes Shell Transport & Trading (No. 30). Although the British energy giant has infuriated investors by downgrading the size of its oil and gas reserves four times this year, Meehan says Shell –- which is one of Europe's biggest retailers as well a major gasoline supplier -- has kept customers happy with its generous Shell pluspoints loyalty program and the wide range of competitively priced products it sells at its filling stations.
"A key thing about Shell is that it hasn't lost sight of what unites people," says Meehan. "It knows what the common denominator is and doesn't try to be too sophisticated." In other words, it provides a reasonable range of groceries and other products at its filling-station convenience stores, but it doesn't befuddle the customer -– who likes to be in and out of the store as quickly as possible –- with too much variety.
A number of other customer-aware companies –- such as German auto maker Porsche (No. 1), London-headquartered brewery group SABMiller (No. 3), and Danish energy-to-shipping group A.P. Moeller-Maersk (No. 13) -- feature in the European BW50. But beyond this group's confines, such companies are few and far between. The vast majority have little real understanding of what their clients want and make little real effort to find it out, Meehan says.
"Many senior managers are out of touch," he says. "The average manager spends only 15% of his or her time with customers." Take retailers: "Managers at the best-performing stores walk up and down the aisles," says Meehan. "They stand behind the check-in desk and want to know everything that's going on." In underperforming stores, they tend to spend most of their time in their offices.
Meehan reckons that 75% of customers are dissatisfied with the service they get –- a huge proportion. But few of them switch allegiances. In part, that's because of their own inertia. In part, it's because other companies aren't any better. Either way, "the customer is not the king," says Meehan.
Still, things may be changing. Customers are becoming more militant and increasingly less forgiving of mistakes and bad service. One company that has spotted the trend is Barclays (No. 24). The British bank recently unveiled plans to put 1,000 more tellers in its branches, which it will pay for by axing 800 middle-management jobs. The aim: to serve customers more quickly and make them happier. The bank is also increasing the salaries of many branch staff by way above inflation levels in a bid to improve morale and encourage a friendlier and more efficient interchange with customers.
The question now is whether other European companies will get the message. If they do, the competition for top slots in the European BW50 could be a lot tougher next year.
By David Fairlamb in Frankfurt