[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 for companies to escape from and maybe do better than a product-centric approach. I want to start moving our way towards customer-centricity but before I get you a definition and talk it through. I would like you to think about customer-centricity means? Based on your experience as well as what I've discussed so far. And so in order to do that, I want to work with a series of examples here. In fact, on the 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 Nordstrom. A high end, very 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. 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 in deciding which of these firms are or aren't customer centric. So let me just 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. Again, Walmart is a terrific firm. But Walmart knows surprisingly little about any one of its customers. Unlike Harrah's, 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 is doing. And how they can influence each costumer's behavior. So while Walmart might not make a lot of efforts to understand what anyone costumer is going to buy, they make great efforts to understand the costumers 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 Southeastern US, they need to fill the storage 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 its about selling in great volumes, its about bringing the cost 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 all the aspects that I mentioned for product centricity apply to Walmart. So in many ways I excuse them. I allow them to focus on product centricity, because they're so good at it. There are few firms in the world that can operate 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 analyses to try to predict what any one customer's 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 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 excellence 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 the 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 called scan and go. A mobile app that let's 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 let's them be more operationally excellent, but also let's 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, but letting them understand their customers a little bit better. Whether it's tracking people's 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 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 can 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 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 just casual conversations you have with them, they might know what movies you like? What kind of clothing you like to buy. Something about your job, your family. And 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 adviser 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're not that customer centric. At a national level. You take your Starbucks loyalty card and you bring it to a Starbucks in another city or another country. And show it to them and say I like the usual please. They have no idea who you are. So now they not need your immediate needs. But it's hard for them to be a trusted adviser 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 be able to identify you and 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. It's the balance between focusing on the product and focusing on the customer that so many companies are now struggling with. And finally, there's Nordstrom, 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 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 is a high-end department store. They sell clothing, shoes, and so on. On thing they don't sell is tires, yet, one day someone walked into a Nordstrom store. Supposedly in Fairbanks, Alaska and wanted to return a set of tires that obviously they could not have bought at Nordstrom. Perhaps there was a tire store at that location before Nordstrom opened shop. And Nordstrom's being so incredibly customer-centric gave them the money back for tires that they didn't buy at Nordstrom. 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 enough money back for the tires that they thought they bought from us, if I 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 will 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. Nordstrom offer 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 example is a great example of where product and customer centricity collide. And what I want to do now is to start focusing on what customer centricity really means. And that's what we're going to do next. [MUSIC]
