Most companies talk of placing customers at the heart of their business, yet very few actually do. I explore why understanding customers is so difficult and why it is so vital.
I was with a customer last week working on their global customer account process. We were discussing the ethnographic customer experience research that Futurecurve had completed. My customer was delighted with what we had uncovered for them but was lamenting on their own incompetence at conducting any type of deep customer listening or understanding themselves. I reassured him that his company was not alone: most find this difficult to do. And then I started wondering, why is this so difficult for businesses?
This customer of ours is one the largest companies in the world. I mention this purely to illustrate that even the most successful companies find deep customer listening and customer exploration hard to do. But although it is hard, they have now realised that it is vital to understand their customers to maintain their position in a changing world. Sales falter as customers’ needs change, they become more demanding, and increasingly look for the exact product to fit their needs, rather than buy a product which has been pushed on them by an unempathetic and inflexible company.
The big issue
There is an overriding issue why companies find it so difficult to listen to and understand their customers. It stems from the way business is viewed as a largely rational endeavour, and is also linked to the way businesses have been run for the last 100 years. Let me explain. Every business has an internal part and an external part. The internal part, the operations and the staffing, is under the control of the business, and operational planning is done by finance staff using detailed planning and forecasting spreadsheets and tools. The internal part is mainly about managing people and managing costs.
Contrast this with the external, revenue-generating side of the business. This is about customers, and customers can’t be controlled in the way that internal resources can. Yet so many companies still base their revenue forecasts and their sales and marketing strategies on the same type of financial planning and forecasting as they do on the internal cost side, through detailed spreadsheets and tools that forecast revenue for the next one, two, three, or even five years. This is very comforting to finance people and gives an alluring sense of safety, but it’s unreal.
In an attempt to de-risk the demand side even further, companies who want to play safe opt to focus on broad markets. In this world, their marketers use the classic ‘push’ approach to marketing, using segmentation, targeting and positioning. They divide the appropriate market for their products into sectors, then into segments, and then in target groups, and then they position their marketing campaigns to those target groups. They assume many things, including that the sectors and segments are correct based on their market research, and that the target groups are homogeneous and will all receive their message and act upon it in a similar way.
This idea of broad homogeneity fits neatly with finance departments’ comfortable world view that the demand side can be neatly forecasted in the same way that the internal cost side can. When the market is broad and companies think customers are homogeneous, complacency creeps in. The belief here is that it’s a huge market and anyone in their broad target group is a potential customer, so they can just go and sell stuff. This is why sales are faltering in many long-established companies. They haven’t kept up with the changing world of their customers. Customers are not homogeneous. They are becoming more and more demanding as the ease of sharing information makes even the most technical B2B markets almost transparent.
We meet many companies who are like this, who are still doing business the same way they were 20 years ago. They always tell us their issue is solely about price, that customers are just looking for a better deal. My answer is always that price is only an issue when they haven’t demonstrated their value. And a huge part of value comes from truly and deeply understanding what their customers’ needs are and how they are going to satisfy those needs. This can’t be done with standard quantitative market research or by analysing big data. It can only be done through deep listening and observation of how customers use their products and services in action. Deep listening and observation will uncover why customers behave and think as they do, and it is critical to know this to really understand them.
The top 7 culprits
We’ve looked at the macro issue, so now let’s explore in more detail some of the symptoms that you are likely to see manifest at your workplace. Here are my top seven reasons why companies find deep listening and understanding their customers so hard to do.
1. They’re good at what they do and what they know.
Technical, scientific or engineering type companies have grown because they are brilliant in their technical area. They are often the experts in their field and have built businesses based on this area of expertise. They then assume that customers are ‘just like them’ and will naturally seek out and want what they are selling.
The thinking with these companies is both, ‘Why do I need to listen to my customers when they are just like me?’ and ‘If I build my superior products, customers will just come to me.’
2. They know more than their customers.
Similar to the example above, experts have designed a product or service and spent time explaining and telling customers and prospects how it works.
The thinking here is, ‘I’m the expert, I know more about this product or service than anyone else, so why do I need to/why should I listen to and try to understand what customers want? I know what they want and I’ve built it for them.’
3. They assume customers already know.
Groupthink is dangerous to companies. It can be the main factor that causes companies to fail. Groupthink sways business, social and governmental decisions to go so badly wrong that they sometimes even lead to war.
Wikipedia describes Groupthink as “a psychological phenomenon that occurs within a group of people, in which the desire for harmony or conformity in the group results in an incorrect or deviant decision-making outcome. Group members try to minimize conflict and reach a consensus decision without critical evaluation of alternative ideas or viewpoints, and by isolating themselves from outside influences.”
The thinking here is, ‘We are the experts and by trying a different approach to the one we always use, or by bringing in outside views, we might be vulnerable and lose the cohesiveness of our group.’
4. They don’t want to hear complaints.
One of the most common concerns that people express, when we start work on deeply understanding what their customers want or how their customers use and interact with their products or services, is that their customers will just unload tons of negative stuff, have a hate-fest and unleash all their worst comments and emotions. In the 11 years we’ve been doing this ethnographic work, this has never happened. Sure you might get some negative comments, but mostly customers have a vested interest in your success as a business. They want you to succeed, not least of all because they need to justify how smart they were in choosing you as a supplier. So mainly customers will be very helpful and will offer thoughtful insights into what they like and don’t like, and how the company can improve.
The thinking here is, ‘We’ll open up a can of worms by actually asking customers what they think, so best not go there.’
5. They don’t know how to do it.
The type of company that doesn’t know how to understand its customers will often give an internal, usually junior and inexperienced, person the role of either gathering some research by himself or buying in some research. While this, at least, is making a start on understanding its markets and customers, the danger is that it will turn into a company in the next category.
The thinking here is, ‘We don’t know where to start as we don’t know what we don’t know.’ Also, ‘If we don’t know then it can’t be important.
6. They’ve got tons of market research and don’t need any more.
We worked with a company a few years ago which had a global market research department of 1,000 people yet they had no real insights into the particular issue they called us in to address. After we had waded through much of their recent research material it became clear that it was all a) quantitative research, and it was all b) rational research. So it was no wonder there was an insight deficit. There was no information about the nuances of human behaviour, about the emotional impact of their products on customers’ feelings, nor even about the practicalities of the customers’ experience from the moment they first interacted with the company, through to how they were signed up and how they were managed as a customer. No one had a view from the customers’ perspective of the customers’ total emotional experience.
The thinking here is, ‘We’re already doing lots of research, so why would we need to do more?’ It’s not more of the same they need: it’s a different approach to research.
7. They’ve been successful and dominated their market for the past 30 years.
These companies haven’t recognised that the world around them, and most importantly their customer base, has changed. They think that their customers just want to squeeze them for lower costs all the time, but they’re often missing the point that due to the internet and new, immediate ways of communicating and being globally transparent, their customers have fundamentally changed the way they do business and what they want from a supplier.
The thinking here is, ‘Our formula has always worked so why fix it if it ‘aint broke?’
While these seven reasons all look very different, there is one thing that pulls them all together. The one thing that stops companies from truly understanding their customers is fear. With the arrogant companies it’s often fear of being or looking vulnerable, and with others the fear of uncertainty is the biggest barrier to action and change. The most important things that leaders in organisations can do is to recognise their fear for what it is; take time to let ideas settle and stew; learn to live with ambiguity and uncertainty for a while; but ultimately, in the words of Susan Jeffers’ bestselling book, it is most important to feel the fear and do it anyway.
To truly understand today’s customers, companies must strategically move away from working with broad, homogeneous segments of target customers towards working with smaller clusters of customers based on similar behaviours. In a changing world, only by understanding customers will companies’ sales remain good. To achieve this, companies must involve themselves in deep listening and observation. They can’t do this with checklists and questionnaires but need to take time and considerable amounts of empathy to experience the world as their customers experience it.
Do you identify with any of these 7 culprits in your business? Do let me know and also if you have any to add to the list.
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