Deep dive customer centricity

Conversations on the Future of Business
Deep Dive:
Customer Centricity
Embracing the New Paradigm
futureofbusiness.sap.com

Customer Centricity
There are more
connected devices
than people on earth.
Challenges
Source: Cisco
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The transformation seems to have happened overnight. Yet like all market revolutions, it was driven not
by a single event, but through the convergence of long-term trends that reached a dramatic
tipping point.
Today’s customers are different. They exhibit
different behaviors, different needs, different
expectations.
Customers interact with brands in novel ways. They
want customized products and personalized service.
They extend the sales cycle across channels. They
demand that the companies they do business with
respond when they want, where they want, and how
they want. They desire to share their values with you,
and their opinions with other customers. They can
be your absolute dream—or your worst nightmare.
What happened? A shift in demographics. The emer-
gence of mobility. The power of networks. A meteoric
rise in expectations.
The customer has changed.
Now it’s your turn.
It all adds up to a single imperative: Embrace the new
customer-centric paradigm—or step aside as your
customers race to competitors.
Demographics
Around the world, a new generation is coming of age.
The so-called millennials—those born in the two de-
cades before 2000—will make up the most powerful
market force in half a century.
At 80 million strong in the United States alone, the
millennials outstrip the boomers by millions. U.S.
millennials already spend more than $170 billion a
year, a number that will only rise with their influence.
Don Tapscott, Best-Selling Author and Business
Consultant, on Digital Consumers
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Millennials are digital natives. They’ve never known
a world that doesn’t run on IT. Their lives transition
seamlessly between real and virtual. And they ex-
pect companies to do the same—from storefront to
web front, from mobile to social.
Mobility
Millennials are relentlessly mobile. But so are the
rest of your customers—including those who never
used a computer before their 50th birthday.
Today there are nearly 6.8 billion mobile subscrip-
tions worldwide. Some 1.5 billion smartphones. At
least 1.73 billion consumers on social media.
Your customers are now always connected, always
on—and increasingly accustomed to anywhere, any-
time satisfaction. If they don’t get it from you, they
can quickly find it somewhere else. If you’re not de-
signing for mobile, you’re already losing customers.
Networks
Welcome to the Network Economy, an era of
unprecedented connectivity and interaction. New
connections and social platforms shift the balance
of power from provider to consumer.
Social media disrupts the way companies interact
with customers and places a new premium on any-
time, anywhere contact. Customer passivity is long
past. Consumers now actively share their likes and
7 Strategies for
Customer Centricity
Focus on high value. Understand what your customers want to achieve.
A bank branch, for instance, may need fewer tellers but more financial
advisors to serve high-value customers.
Let customers choose the channel. Consumers who shop both online
and in stores spend more. Make it easy for customers to do business when,
how, and where they want.
Embrace mobile. Consumers across industries conduct more and more
mobile business. Mobile customers can cost less in the long run, so
understand what they want and create incentives for mobile channels.
Help customers use your products. Home-improvement stores offer
do-it-yourself classes and installation services. Car dealers let customers know
when it’s time for a tune-up. How can your company take a similar approach?
Let customers benefit from loyalty. Merchants provide frequent shoppers
with perks, from discounts to partner promotions to better service. Many
industries can leverage similar tactics.
Make customers your cocreators. Engage customers so they feel they have
a stake in your brand. Open an ongoing dialogue so customers not only offer
feedback but actually help you meet their needs.
Tailor offerings to individuals. Collect customer information—and analyze
it for better insights. Seventy percent of bank customers would provide more
personal data if it drove better service, says Ernst & Young.
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dislikes with fellow shoppers across the street and
across the globe—all in an instant.
Companies, too, are increasingly networked, re-or-
dering the way they’re organized and how they go to
market. New paradigms in manufacturing, distri-
bution, and transactions mean costs are falling and
capabilities emerging. Old competitors surge to the
lead, while new competitors appear overnight.
Even machines are networked, with
machine-to-machine (M2M) connectivity linking
15 billion devices today and 50 billion by 2020. The
result is a world that never sleeps, with multiplying
intelligence—and escalating customer demands.
Expectations
With greater market force, mobility, and
connectivity, customers have ever-higher
expectations for service. They seek personalized
experiences tailored to their unique needs. And they
expect experiential consistency across every
channel and touch point.
Today’s customers want to be valued, and they want
you to share their values. They need to feel they’re
collaborators in designing your products and meet-
ing their own demands. When they’re pleased, they
can become your strongest allies. Disappointed, they
can rapidly damage your brand.
“Marketing needs to become a champion for the customer expe-
rience across all channels.…Marketing can’t own all the customer
experience channels but it can make the experience consistent
through counsel rather than direct management.”
Jonathan Becher, CMO, SAP
No longer limited by geography or even
time, customers know they’re in the driver’s
seat. Fail to respond, and they’ll abandon
you in an instant—to your loss, and your
competitor’s gain.
Over half of consumers
would consider ending their relationship
with a retailer if they are not given
tailor-made, relevant content and offers.
54%
Source: CMO Council
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Customer Centricity
Opportunities
3 out of 4 consumers
rely on social networks to guide
purchase decisions.
Source: ODMGroup
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There’s something peculiar about market transformation. The same forces that leave behind last week’s
losers simultaneously shape the champions of tomorrow. For the closed-minded companies that resist
change, the consequence can be lost customers, dwindling profits, and shrinking market share. For the
forward-thinking enterprises that embrace the new paradigm, the rewards are greater mindshare, wallet
share, and wealth.
Demographics
As the largest demographic since the boomers,
millennials represent tremendous opportunities for
companies to win new business and grow market
share. The digital natives have the potential to be
more engaged and responsive, welcoming new in-
novations and market entrants. They’re open to new
Mindshare, Wallet Share,
and Wealth
ways of doing business—models you could create
that your competitors haven’t even thought of yet.
Mobility
With proliferating mobile technologies, you have ac-
cess to customers wherever they happen to be. You
can find new markets
Millennials are 3x as likely
to follow brands rather than
a family member on social networks.
and extend your reach far beyond what was feasible
even a few years ago. You can leverage new technol-
ogies for first-mover advantage, outflanking your
competitors before they even know what hit them.
Source: Brian Solis
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Be the voice of the market. Most employees see no tangible benefit to
listening to the market. But Marketing should. Marketing must be the cultural
catalyst to get the company tuned in to the customer.
Champion the customer experience. Most customer/brand interactions are
still fragmented, from in-store to website, from mobile to social. But that last
channel, social media, means customers can broadcast inconsistencies far
and wide.
Tend the brand. Companies no longer control their brand. Instead, marketers
should take a more subtle approach, working with internal departments
to humanize the brand and with external constituencies to influence
brand perception.
Capitalize on insights. Customer, market, and social data analytics can
give marketers a macro and micro view of the customer in real time. Use
this unprecedented knowledge to your advantage. That means personalized
content, instant offers, on-the-fly account planning, and more.
Be an integrator and force multiplier. Large organizations tend to be siloed
by function, product, and geography. Marketing needs to bridge these divides.
Understand your company’s overall value proposition, and communicate that
message enterprisewide.
Marketing’s New Mandate:
5 Business Drivers
Networks
Social platforms offer opportunities for engaging
customers like never before. Companies that use
social media to their advantage can recruit countless
ambassadors to carry the brand forward. They can
take the pulse of customer sentiment in real time,
respond in kind, and instantly understand whether
new strategies are successful.
A more networked organization means you can bet-
ter capture customer and market information. Share
those insights across the enterprise. And continually
push that knowledge out to customer-facing func-
tions. M2M will allow your physical assets to do
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What’s the role of marketing departments in today’s hyper-connected, highly competitive
marketplace? Going forward, marketers must to embrace five core responsibilities:
Josh Linkner, Best-Selling Author and
Entrepreneur, on Becoming Customer-Centric
Read more about modern consumers and companies’ business
models in What Every CEO Should Expect From Their CMO.
8

“Two words define the pathway to customer experience
improvement: engagement enhancement. This can
be physical (activating more of their senses), mental
(soliciting their ideas and influence), or emotional
(providing peace of mind, laughter, or some other
positive feeling), and often a combination of the three.
Viewed through this lens, there’s no end to what
we can do.”
Steve McKee, President, McKee Wallwork & Co.,
Author, When Growth Stalls and Power Branding
some of that work for you, becoming a self-learn-
ing infrastructure that can continuously sense and
respond.
Expectations
Meeting new customer demands across location,
channel, and touch point offers tremendous oppor-
tunity to strengthen your brand. Companies that
grasp market-of-one thinking and crack the code on
personalization will be far more effective at delight-
ing current customers and attracting new prospects.
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Customer Centricity
Acquiring a new customer is
6x to 7x more expensive
than keeping a current one.
Imperatives
$ $ $
$ $ $
Source: White House Office of Consumer Affairs
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A famous hockey player once said, “I skate to where the puck is going to be, not to where it was.”
Customer centricity is all about anticipating where customers are heading tomorrow, not where
they happen to be today.
Customer centricity can give you first-mover advan-
tage. It can also position you to energize the custom-
er experience by delivering products and services
that meet customer needs—before customers are
even aware of those desires.
But to realize those objectives, you need to take
proactive, transformative steps. These are the im-
peratives to achieving customer centricity. Among
other strategies, you need to target each customer
as a market of one. Engage customers as codesign-
ers of your products, services, and brand value. And
leverage emerging technologies, including Big Data,
mobile, and social.
Skate to Where the
Puck Will Be
Understand Aspirations
As part of the creative process, artists sometimes
ask, “What does this piece want to become?” Com-
panies can take a valuable lesson from this practice
as they engage with customers.
What are your customers trying to achieve? What are
their aspirations? Meeting needs today is important,
but competitors can beat you at that game. Under-
standing desires tomorrow is much more compel-
ling—and far more likely to deliver value, both to your
customer and to your organization.
Understanding customer aspirations starts with
insights gained through Big Data. Fine-grained
customer knowledge and predictive analytics can
give you powerful tools in understanding and fore-
shadowing customer behaviors and needs.
But meeting customer aspirations also requires
innovation and risk taking. What models will sustain
your business going forward? Can you deliver better
customer experience through unique products?
Personalized service during the sale? Additional
services after the sale?
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Read more in How to Make Consumers Love Their Banks.
Some of your experiments will fail. But for any of
your bets to pay off, you’ll need to keep innovating
and taking risks—with rapid prototyping and im-
plementation so that you can quickly identify what
succeeds.
Target a Market of One
The concept of one-to-one marketing was
established nearly two decades ago when
Don Peppers and Martha Rogers released their
best-selling One-to-One Future. That vision has at
last become reality through advances in Big Data
and cloud solutions.
But now, mobile and social technologies are shifting
the locus of marketing. In the past, marketers had
the “four Ps”: product, place, promotion, and price.
Today, that’s no longer sufficient. What companies
require today are what management guru Don
Tapscott calls the ABCDE of Marketing: anyplace,
brand, collaboration, discovery, and experience.
What’s more, targeting a market of one goes be-
yond mere one-to-one marketing. Customers want
not just a personalized channel but also a person-
alized product and a personalized experience. That
requires continual feedback loops to ensure you’re
capturing customer sentiments and using them to
drive your value proposition.
Industry Focus: Banking
for the Love of Customers
For some industries, the customer cen-
tricity tenets are a natural fit. For others
they might not seem so obvious. Banks,
for example, tend to lack the emotional
connection with consumers that drives
trust and loyalty. So how can they fight
back against powerful new competitors
like PayPal and Google? The same way
organizations in any industry can: by
focusing on customer experience.
Too many banks are run for bankers, with
a focus on processing transactions and
containing risk. To consumers, a bank is
little more than a place for storing and
transferring money.
Now, Internet-only banks, mobile pay-
ment services, and nonbank transaction
providers like Google Wallet and PayPal
are eating into banks’ core business. But
banks, with their mix of branch, online,
mobile, and ATM services, have a strong
foundation for becoming one-stop
shops—and more important, trusted
advisors—for all financial needs.
The way to capitalize on these channels
is to optimize the customer experience
across touch points. But for many indus-
tries, such customer centricity requires
a transformation, one that reimagines
channels and processes to enable fast
response to new market possibilities.
Banks, like many companies, are at a
crossroads. They know they need to
transform to remain competitive. And a
transformation that makes companies
more customer centric offers them the
best opportunity to thrive.
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Engage Customers as Codesigners
In the past, companies churned out products, and
customers either bought them, or they didn’t.
Organizations that hit on the right product mix suc-
ceeded, and, all things being equal, those that didn’t,
failed.
But customers are no longer satisfied to be passive
recipients of a corporation’s conception of what they
want. Instead, they expect to be partners in the of-
ferings you bring to market and the value your brand
represents.
That starts with their ability to broadcast opinions
through social media—on a real-time, global basis.
For companies that ignore this reality, the conse-
quences can be dire. For those that embrace it,
there’s an opportunity to better engage customers
and glean valuable customer insights.
Some companies are taking this a step further—like
Starbucks with its My Starbucks Idea—creating their
own social platforms to collaborate with customers.
Such strategies reflect the emergence of the
“prosumer”—consumers who are engaged to the
point of creating content and even intellectual capital
in a symbiotic relationship with your brand.
Leverage Untapped Technologies
Mobile and social technologies have revolutionized
the way consumers interact with their friends and
families, their governments and societies. Those
innovations are having the same transformative
effects on consumers’ connections to brands. And
as customers rove from channel to channel, they
leave an invaluable digital trail. Companies that
gather, analyze, and act on these omni-channel
activities can better understand customer desires
and better fulfill their needs.
Yet most companies still view customer data from
the wrong end of the telescope. They track past
behavior—only to create yesterday’s customer expe-
rience. Instead, companies must capture emerging
customer sentiment to truly understand customer
motivations. That will enable them to craft a cus-
tomer experience that’s unique to the individual—
and a differentiator in the marketplace.
Doing so requires careful investment in technology
capabilities. The fact is, many organizations are
overwhelmed with the sheer volume of data avail-
able to them. To realize the promise of Big Data, they
need to avail themselves of in-memory databases
and state-of-the-art analytics to turn information
into actionable insights.
Energize Customer Experience
Ultimately, the objective is for your organization to
provide a unique value proposition to customers
that makes your brand and offerings irresistible
to them. To achieve that goal, you need to offer a
superior customer experience. And you need to do
it again and again, for every customer across every
channel and touch point.
Several trends raise the bar on such customer
experience. First, consumer technologies
increasingly blur the line between the real and the
digital. From gaming and video environments like
Xbox Kinect, to personal fitness devices like Fitbit,
to Internet-enabled home-management solutions
like the Nest line, products and services integrate
the physical with the virtual at every turn.
What’s more, the legions of mobile consumers
expect instant gratification, from connectivity
to content, from productivity to products. The
expanding universe of mobile solutions—from
productivity apps like Evernote, to reality-bending
games like Ingress, to mobile/event integrators like
DoubleDutch—drives higher and higher customer
expectations.
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The good news is that innovative companies can
leverage these technologies to their advantage.
They can better engage prospects, offer personal-
ized content and promotions, complete frictionless
transactions, and fine-tune their offerings based on
real-time insights. Organizations that wield these
tools effectively can gain a customer-experience
edge.
Today’s customers have choice. They want what
they want, when, where, and how they want it. And
they flock to the companies that give it to them. It is,
in fact, a new paradigm. But for those savvy enough
to embrace it, the rewards will be rich indeed.
T-Mobile, on Engaging Customers Like Never
Before
“The best companies are always a little bit ahead of their
customers. You have to simultaneously be in touch with
your customer and know them in the present, while
always trying to understand where they’re going to go
in the future.”
Bill Foulkes, Professor of Business, Rhode Island School of Design
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The secret could be its loyal customers. But
LEGO didn’t attract legions of avid fans simply
by chance. Instead, the Danish company has
carefully cultivated relationships with each
customer type.
The company segments customers based on
brand affinity. At the top of the pyramid are
“lead users” who engage with LEGO to the
point of helping to create new products. Next
are “one-to-ones” with whom LEGO maintains
an ongoing dialogue. Third are a “connec-
tive community” who spend time on LEGO’s
collaborative online platform. And finally are
“active households” that have purchased a
LEGO product.
Moving up the Pyramid
LEGO’s goal is to move customers up the pyr-
amid. It achieves that by engaging consumers
and optimizing their experience in as many
ways as possible.
For starters, the company runs a robust loyalty
program, both online and in stores in 24 coun-
tries, that lets customers earn rewards. It also
encourages the development of LEGO-themed
communities. There are now more than 50 such
groups, including the LEGO Club, which boasts
more than 4 million users.
LEGO wasn’t always so customer-centric. But
after suffering a $191 million loss in 2004, the
company began to reorganize with greater cus-
tomer focus. Today, all departments that have
direct contact with customers are centralized to
ensure an optimum customer experience.
The company also invested in enterprise soft-
ware to support its customer centricity, includ-
ing SAP ERP, SAP CRM, and tightly integrated
loyalty-management software. Such integration
is key: Companies that closely integrate their
applications achieve a 20 percent improve-
ment in customer experience, according to
Bloomberg Businessweek Research Update.
Ultimately, the technology helps LEGO respond
to customer desires—and drive customer loy-
alty and value.“By involving consumers in the
things they are really passionate about, they will
become ambassadors for the brand,” concludes
Conny Kalcher, LEGO’s vice president of con-
sumer experiences.“That is really powerful.”
Read more about LEGO’s success in Through
Engagement and Interaction, The LEGO Group
Nurtures Loyalty Among Consumers.
LEGO Group must be doing something right. The world’s fourth-largest toymaker earned $1
billion on $4.2 billion in revenues in 2012. Revenues were up 25 percent that year, and another
13 percent in the first half of 2013.
LEGO Group:
Building a Bridge to the Customer
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Learn More
• Conversations on the Future of Business
• Conversations on Customer Centricity
• SAP Center for Business Insight
• SAP Business Innovation Blog: Customer Centricity
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