THREE KEY ELEMENTS OF CUSTOMER-FOCUSED COMPANIES

THREE KEY ELEMENTS OF

CUSTOMER

FOCUSED COMPANIES by Phil Bounsall and Patrick Gibbons

Almost every corporate executive would agree it is good to be customer focused. Staying connected to your customers ensures you are providing products and solutions that meet their needs, you are adjusting to their likes and dislikes, and you are providing levels of service with their expectations. However, the term “customer focused” is vague and empty, leaving some asking, “What does that really mean?” Some feel that being customer focused is something embedded in their company’s “DNA.” However, that does not really explain the true ingredients that make a company customer focused. Our experience points to several key ingredients that make a customer-focused company different and better than others.

THREE KEY ELEMENTS OF CUSTOMER-FOCUSED COMPANIES

THE PERFORMANCE OF CUSTOMER-FOCUSED COMPANIES First, we should ask ourselves if it really matters. Do customer-focused companies actually outperform other companies? Walker has carefully studied this over the past decade to better understand the difference it makes. We have conducted studies in industries such as hardware, software, online retail, financial services, and others. In these studies we ask the users of such services about their experience with their vendors and partners. In every case we’ve noticed a very consistent trend – those companies having higher degrees of customer loyalty outperform their competitors in all major business measures including growth rates, profitability, and stock price. It’s clear that companies with a stable, loyal customer base have a competitive advantage.

THE WALKER INDEX Another measure we monitor on a routine basis is the Walker Index. Walker established this to measure the impact on our clients, but quickly found the information to be particularly interesting when considering the impact of customer strategies. The Walker Index is a stock index comprised of Walker clients. Walker clients are included in the index only during their tenure as clients and it is calculated assuming an equal weighting of all clients. It is based on cumulative percentage change in the market value of the equally-weighted, hypothetical portfolio of Walker’s publicly traded clients. When we track the stock price of this index, compared to the other major indices – the Dow Jones Industrial Average, the S&P 500, and the NASDAQ, we notice a significant difference. Walker clients outperform these other indices by a factor of more than 5 to 1. The Walker Index demonstrates the kind of companies that are attracted to customer-focused strategies and how these strategies have had a significant payoff in the marketplace. These are companies that use the insights of their customers as an important management lever – a lever to impact the results that drive shareholder value.

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WHAT MAKES THESE COMPANIES SO DIFFERENT? So what is it about these companies that makes them different and better? There’s obviously some mix of ingredients in their organization that make them customer focused. While many believe this is some magical or elusive trait, Walker assembled their consultants to discuss this topic and see if we could find common elements throughout our base of clients that represent the commitment to customer-driven management that leads to higher performance. Our consultants shared dozens of observations and best practices that all make some degree of impact. Ultimately, when we put our notes together, three general criteria stood out as the most important ingredients.

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THREE KEY ELEMENTS OF CUSTOMER-FOCUSED COMPANIES

1. LEADERSHIP

Creating a customer-focused culture starts with leadership. In the best examples, we see leadership at all levels that show a commitment to the customer and to leveraging their insights to improve performance. While leadership starts at the top, it doesn’t mean that only the CEO is customer focused. We find that there are leaders at all levels who rely on customer information to make strategic and tactical decisions. Managers insist their departments consider the customer in their daily tasks, and cross-functional teams are in place to put the voice of the customer into practical everyday use to improve performance. We often find the executive team is visibly engaged with the customer and strategies are anchored by the ability to drive customer success. Leaders are focused when making capital and strategic decisions. They address each issue by asking themselves, “What’s in it for our customers?” Certainly, leadership across the organization is a key element in forging a customer-focused culture.

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2. INFRASTRUCTURE

Another element is the structure established to enable organizations to truly leverage feedback and insights of their customers. Customer-focused companies have processes and systems consciously designed and built to include customer insights. Every strategy and decision is predicated on helping the customer succeed. Most companies ask themselves, “How will this decision affect us?” However, a customer-focused infrastructure directs attention to how decisions affect their customers. These companies have well-developed information systems that collect insights from customers and delivers the right information to the right person at the right time in a manner in which they can take action. These organizations have integrated communication plans that ensure customer insights are not only delivered to all relevant audiences, but that they understand how to use them. Education and training programs are in place to engage the users of customer information. Customer strategies are aligned with the organization’s most critical business strategies and the organization invests in the development of its most important customer experience asset – its people. Particularly in large and complex organizations, a solid infrastructure is a key element in building a customer-focused culture.

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THREE KEY ELEMENTS OF CUSTOMER-FOCUSED COMPANIES

3. ACTION Companies that implement customer strategies can do an exceptional job of listening to customers, analyzing their insights, and understanding their implications; but if they do not take action they will never see the true benefits of being customer focused. Without action nothing gets done. We know it’s not easy – taking action is the number one challenge of customer advocates and strategists. Customer-focused companies drive action with training, technology, and follow-up systems to ensure customer insights are understood, relevant, and put to use. Everyone in the organization treats an interaction with a customer as a moment of truth and it’s their job to leave a positive impression. We find action-oriented companies have a skill for conducting consistent follow up. Customer-facing employees understand the importance of using customer insights to solve problems and improve the business.

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THE CUSTOMER-FOCUSED DIFFERENCE We believe being customer focused is an essential element to business success. Weaving this perspective into business decisions produces more loyalty and allows companies to realize a variety of benefits contributing to their success. • An

increase in organic growth

• Higher • An • A

increased share of wallet

reduced cost in serving customers

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retention of at-risk customers

development of customer-centric innovations

more sizable competitive advantage

• An

enhanced ability to manage key accounts

• Improved • The

methods in defending market position

ability to make more accretive acquisitions

The term “customer-focused” may be vague, but its impact is substantial. Those companies that have good leadership, provide a strong infrastructure, and possess a bias for action have the right ingredients for strong business performance.

ABOUT THE AUTHORS PHIL BOUNSALL President As president at Walker, Phil is focused on the development and execution of strategies and operating plans designed to enhance Walker’s position as a global leader in customer strategy consulting. Phil leads Walker’s efforts in the areas of business impact consulting and mergers and acquisition services. Phil first joined Walker Information in 1994 as chief financial officer after a 12-year career with public accounting firm, Ernst & Young, where he focused on entrepreneurial companies and corporate finance transactions, including public and private offerings. He also spent five years as the chief financial officer of Brightpoint, Inc. (NASDAQ:CELL), a global company providing distribution and logistics services to the wireless communications industry. He then joined Walker again as executive vice president in January 2004. Bounsall also served as an independent member of Walker Information’s board of directors from 1988 through 2003. Phil currently serves as Chairman of the board of directors of Special Olympics Indiana. He also has served on the executive and finance and investment committees. He serves on the advisory board of the Children’s Bureau, Inc., in Indianapolis. Bounsall currently serves on the board of directors for the Association for Corporate Growth, the Indiana State Chamber of Commerce, and the Greater Indianapolis Progress Committee.

PATRICK GIBBONS Principal, Senior Vice President Marketing Patrick Gibbons is a Principal and Senior Vice President for Walker, a leading customer strategy consulting firm. Gibbons has global responsibility for definition, branding, and promotion of company and its solutions. He has published and/or contributed to a number of articles on customer strategies, has been a featured speaker at a wide range of conferences, and has produced a series of online and in-person forums for Walker clients. He is also one of the primary developers of Face Value – an award-winning, patented educational exercise that unveils the business impact of customer loyalty strategies. Gibbons came to Walker in 2000. He earned his bachelor’s degree in industrial design from the University of Cincinnati and his master’s degree in business administration from Butler University.

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