[MUSIC] Now that we understand what product centricity is all about and we've discussed some of the cracks in product centricity. And even some of the opportunities from companies to escape from and maybe do better than a product-centric approach, I want to start moving away towards customer centricity. But before I give you a definition and talk it through, I'd like you to think about what customer centricity means, based on your experience as well as what I've discussed so far. So in order to do that, I want to work with a series of examples here. In fact, on this slide, you'll see the names of four very famous retailers. Three of them operate on a global level, so Walmart, Apple, Starbucks. I'm sure most of you are familiar with them. And Nordstroms. A high end very, a high touch department store chain here in the US. If you're not familiar with them not a big deal. I think you'll appreciate the story anyway. What I'd like you to do is take a moment, and from your experience with, your perceptions of these firms, decide which of them would be highly customer centric. So I want you to think about what customer centricity means in light of our discussion so far. And decide which of these, could be one, could be all, could be none, up to you, would be above the bar in terms of customer centricity. So think about what customer centricity means, and which of these firms qualify in that regard. Think about that for a second. And then I want to talk through all four of them. In my book, none of these firms are truly customer centric. Now, I want to be careful about this. I have great admiration for all these firms. I'm a big customer of all of them. I really like what they do. But all of them for different reasons. Fail to be truly customer centric, nearly as much as perhaps some of you thought when in deciding which of them, which of these firms are or aren't customer centric. So I'm just going to take a few moments to talk through each one of them, and then, finally we'll bring up our definitions of customer centricity. First there's Walmart. Now again, Walmart is a terrific firm, but Walmart knows, surprisingly little about any one of it's customers. Unlike Harris, unlike Tesco, unlike so many other retailers out there, Walmart does not have a loyalty program. Walmart has made very little effort to date to try to figure out exactly what each customer's doing. And how they can influence each customer's behavior. So while Walmart might not make a lot of efforts to understand what any one customer's going to buy, they make great efforts to understand the customers as a whole. They understand regional differences. They understand when certain kinds of events occur. For instance, when a hurricane is about to hit the south eastern US, they need to fill the stores with water and batteries and so on. So they understand the customer in a generic way but they make very little effort to understand the customers in a very specific granular way as a direct marketer would suggest. And you know what, that doesn’t bother me because Walmart isn’t intending to be a direct marketer. If you think about the Walmart business model, it’s about selling in great volumes, it’s about bringing the costs way down. So, in many ways, Walmart is a prototypical, and a wonderfully successful, product-centric firm. Let's come up with products that we can sell a whole lot of, that's going to let us bring our costs down. And let's figure out ways to extend our product goodness, and, and all the aspects that I mentioned for product-centricity apply to Walmart. So in many ways, I, I excuse them. I allow them to focus on product centricity because they're so good at it. There are a very few firms in the world that can operate in an operationally excellent manner as well as Walmart can. It's a similar but different story for Apple. because Apple again, is the classic performance superiority firm. They don't spend a whole lot of time doing market research, to figure out exactly what the customer wants. They don't spend a whole lot of time focusing on segmentation and real granular analysis to try to predict what any one customer is going to do over time. What Apple focuses on, is leveraging its product expertise. Is taking the kinds of products that they've already developed, and figuring out what are the next ones that they should develop. So again, a classic example of product centricity, and they do it better than most company, most other companies on the planet, and they can get away with it. Now, Walmart and Apple, for the most part are focusing on doing product-centric things. Operational excellent for Walmart, performance superiority for Apple. They are doing some smart things at the margin to understand their customers better. For instance, Walmart is spending a little bit more time developing technology that's not only going to help them learn about their customers, but be even more operationally efficient than they were before. So, for instance, here in the U.S. They have a new program they call Scan & Go, a mobile app that lets people scan products as they move around the store so as they check out, the whole scanning process happens much faster. It's a brilliant idea that lets them be more operationally excellent, but also lets lets them start tagging individual customers and tracking them over time. So they're starting to take on some more customer centric initiatives without sacrificing the operational excellence. And Apple is also starting to do a number of things. Again, small initiatives not driving the business that are letting them understand their customers a little bit better. Whether it's tracking peoples music preferences through iTunes. Or some of the activities that they do in the Apple retail stores. Slowly but surely, they're starting to develop a better understanding of their customers at a more granular level. And who knows? One day, if and when competition catches up and Apple can no longer be the product leader that they are, they could probably turn around and start to be a great customer-centric firm as well. But today, it's not quite as mission critical as it is for other firms. The third company on our list, Starbucks, is a very interesting contradiction. At a local level, Starbucks or any coffee retailer, is very, very customer centric. The Barista, the person on the the other side of the counter, the person who makes your coffee, knows a lot about you if you're a regular customer. Not only does he or she understand your coffee preferences and what other items you might buy in that store but just through the casual conversations you have with them, they might know what movies you like, what kind of clothing you’d like to buy, something about your job, your family and they often make recommendations to you. That are going to make your life better even if Starbucks itself isn't making a penny off of those recommendations. That is customer centricity. Okay, being a trusted advisor to the really good customers, finding ways to lock that customer in and so on. So, the paradox is, while Starbucks is very customer centric at a local level, they are not that customer centric at a national level. You take your Starbucks loyality card, and you bring it a Starbucks in another city or another country and show it to them and say, I'd like the usual please, they have no idea who you are. So not only can they not meet your immediate needs, but it's hard for them to be a trusted advisor and to make other recommendations to you when they have no idea about anything about your history. So to me, that's a really key point. It's not enough for a company to be customer centric some of the time when they know who you are. But a truly customer centric company will identify you and will be able to value you and make recommendations no matter what kinds of interactions you have with them. Whether you go from store to store, whether you go online or offline. That's what customer centricity is all about. Now Starbucks to their credit recognizes this. And they're coming up with all kinds of interesting technologies that are going to let them collect and integrate your data across stores and across other touch points you have with them. They recognize that the opportunities and the necessity for customer centricity is at least as important as it is to come up with the next great coffee flavor. So again, it's that balance between focusing on the product and focus, focusing on the customer that so many companies are now struggling with. And finally, there's Nordstrom's. And while that might be the least familiar company on the list, especially to those of you outside the US, it might be the most interesting example to help us understand what customer centricity really is and isn't. But whether you've shopped at a Nordstrom store or not, you might be familiar with the story that makes Nordstrom so supposedly customer-centric or not. And here's the way it goes. Nordstrom's a high end department store. They sell clothing, shoes, and so on. One thing they don't sell is tires. Yet, one day someone walked in to a Nordstrom store. Supposedly in Fairbanks Alaska, and wanted to return a set of tires that obviously they could not have bought at Nordstrom's. Perhaps there was a tire store at that location before Nordstrom's opened shop. And Nordstrom's being so incredibly customer centric, gave them the money back for tires that they didn't buy at Nordstrom's. Now is that customer-centricity or what? I like to say, or what. If you think about it for a minute, is that really customer-centric or is it actually kind of stupid? Does it make sense to give someone money back for a product that they couldn't possibly have bought from you? For me, I say, most of the time it's probably a bad idea to do that. And the question is, under what circumstances would it be a good idea to do that? Think about that for a second. When would it make sense to give someone money back for a product that they couldn't have possibly bought from you? When would it make sense? And here's the answer. If that customer is incredibly valuable to you, and I'm talking about future value, I'm talking about the fact that we expect this customer to be buying so much from us in the future that if we don't give them money back for the tires that they thought they bought from us, if we don't give them the money back today, we're going to lose that value. If that's the case. We'll happily give you the money back for the tires that you didn't buy. Maybe we'll double the money back. Who knows. So it all depends on the value of the customer. The future value. The lifetime value of the customer. If that's sufficiently high. Then we'll roll out the red carpet for you. And if it's not. And for most customers it wouldn't be. Then we would politely decline. We might still be nice to you, of course, but we're not going to give you money back if we don't see the value in it. And that's the problem with Nordstrom's. Nordstrom's offers such wonderful service. They treat everybody so incredibly well. Regardless of the value of that customer. And that's the problem with Nordstrom's, is that because they fail to focus on figuring out the future value of each and every customer, they're just going to treat everybody really well. And there's a lot to be said for that, it's a wonderful company. I like knowing that when I go in there I'm going to be treated really well. But I think that they're missing some opportunities by picking and choosing a little bit more. In the old days it was impossible to do that, but today Nordstrom's, like every other retailer, has the capability to collect the data and use technology to do a little bit more targeting and a little bit more selection to figure out who is worth the extra special treatment. And who, doesn't necessarily deserve it. So to me the Nordstrom's example is a great example of, of where a product and customer centricity collide. And what I want to do now is, is to start focusing more on what customer centricity really means. And that's what we're going to do next. [MUSIC]
