Change Implementation Techniques for Forming Transitional Team, Creating Alignment, Maximizing Connectedness and Creativity

Technique 8.4 Five Ways to Fail in Being Customer-centric

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Many organisations try to be customer-centric but fail for 1 of 5 main reasons. Answer the following questions with "yes", "sometimes", "no":

1 Denial

i) Do you insist that differences in the profitability of your customers aren't important or aren't measurable? Yes Sometimes No

ii) Do you deny that you have unprofitable customers?

Yes Sometimes No

iii) If you try to measure customer profitability, do you exclude some operating costs from capital costs? Yes Sometimes No

2 Growth illusion

i) Are you adding lots of new customers without knowing how much they will cost to acquire or how long they are likely to stay?

Yes Sometimes No

ii) Are you clueless about the financial profit (operating profit minus a capital charge) you can expect from each new customer?

Yes Sometimes No

3 Illusion of averages

i) Do you make decisions based on average customer profitability?

Yes Sometimes No

ii) Are you unsure of how much profit comes from the best 20% and the worst 20% of your customers? Yes Sometimes No

iii) Are you unsure about which specific elements of customer behaviour causes customers to go into the top or bottom groups? Yes Sometimes No

4 Failure to act

i) Do you fail to make specific managers fully accountable for acting on customer profitability? Yes Sometimes No

ii) Is your strategic plan disconnected from the financial profitability of customers or customer segments? Yes Sometimes No

5 Failure to drive share prices

i) Have you stopped short of figuring out how much each customer segment contributes to your share price and then using that knowledge to drive the price up?

Yes Sometimes No

ii) Have you failed to explain to your manager and other stakeholders how you use your knowledge of customer profitability? Yes Sometimes No

If you answered "yes" or "sometimes" to most of the above questions, you are likely to fail the customer-centric test.


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