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Conversations on the Future of Business

Deep Dive: Customer Centricity Embracing the New Paradigm

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Challenges

Customer Centricity

There are more

connected devices
than people on earth.
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Conversations on the Future of Business

The customer has changed. Now its your turn.


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.

Todays 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 the companies they do business with to 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 emergence of mobility. The power of networks. A meteoric rise in expectations.

It all adds up to a single imperative: embrace the new customer-centric paradigmor step aside as your customers race to competitors.

Demographics
Around the world, a new generation is coming of age. The so-called Millennialsthose born in the two decades before 2000will 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.

A New Generation of Digital Consumers with Don Tapscott, CEO of the Tapscott Group

Millennials are digital natives. Theyve never known a world that doesnt run on IT. Their lives transition seamlessly from real to virtual. And they expect companies to do the same from storefront to web front, from mobile to social.

7 Strategies for Customer Centricity


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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 how, when, 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 its 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 co-creators. 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 informationand analyze it for better insights. Seventy percent of bank customers would provide more personal data if it drove better service, says Ernst & Young.

Mobility
Millennials are relentlessly mobile. But so are the rest of your customersincluding those who never used a computer before their 50th birthday. Today there are 6.8 billion mobile subscriptions worldwide. Some 1.5 billion smartphones. At least 1.73 billion consumers on social media. Your customers are now always connected, always onand increasingly accustomed to anywhere, anytime satisfaction. If they dont get it from you, they can quickly find it somewhere else. If youre not designing for mobile, youre already losing customers.

Networks
Welcome to the Networked Age, an era of unprecedented connectivity and interaction. New connections and social platforms shift the balance of power from provider to consumer.

Conversations on the Future of Business

Social media disrupts the way companies interact with customers and places a new premium on anytime, anywhere contact. Customer passivity is long past. Consumers now actively share their likes and dislikes with fellow shoppers across the street and across the globeall in an instant. Companies, too, are increasingly networked, re-ordering the way theyre organized and how they go to market. New paradigms in manufacturing, distribution, 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 intelligenceand escalating customer demands.

Marketing needs to become a champion for the customer experience across all channelsMarketing cant own all the customer experience channels but it can make the experience consistent through counsel rather than direct management.
Jonathan Becher, CMO/SAP

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.

Todays customers want to be valued, and they want you to share their values. They need to feel theyre collaborators in designing your products and meeting their own demands. When theyre pleased, they can become your strongest allies. Disappointed, they can rapidly damage your brand. No longer limited by geography or even time, customers know theyre in the drivers seat. Fail to respond, and theyll abandon you in an instantto your loss, and your competitors gain.

almost half

54% of consumers

would consider ending their relationship with a retailer if they are not given tailor-made, relevant content and offers.
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Opportunities

Customer Centricity

3 out of 4 consumers
rely on social networks to guide purchase decisions.
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Conversations on the Future of Business

Mindshare, Wallet Share, and Wealth


Theres something peculiar about market transformation. The same forces that leave behind last weeks 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 innovations

and market entrants. Theyre open to new ways of doing businessmodels your competitors havent even thought of yet.

Mobility
Proliferating mobile technologies mean you have access to customers wherever they

happen to be. You can find new markets and extend your reach far beyond what was feasible even a few years ago. You can leverage new technologies for first-mover advantage, outflanking your competitors before they even know what hit them.

Millennials are 3x
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as likely to follow brands over a family member on social networks.

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 better capture customer and market information. Share those insights across the enterprise. And continually push that

Marketings New Mandate: 5 Business Drivers


Whats the role of Marketing in todays hyper-connected, highly competitive marketplace? Going forward, marketers will have to embrace five core responsibilities:

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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. Campion 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 companys overall value proposition, and communicate that message enterprisewide. Jonathan Becher, CMO/SAP

Conversations on the Future of Business: Highlights from Josh Linkners Keynote on 10.16.13

knowledge out to customer-facing functions. M2M will allow your physical assets to do some of that work for you, a self-learning infrastructure that can continuously sense and respond.

Expectations
Meeting new customer demands across location, channel, and touch point offers tremendous opportunity to strengthen your brand. Companies that grasp market-of-one thinking and crack the code on personalization will be far more effective at delighting current customers and attracting new prospects.

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, theres no end to what we can do.
Steve McKee, President ofMcKee Wallwork & Company/ Author ofWhen Growth StallsandPower Branding

Imperatives

Customer Centricity

$ $ $ $ $ $

Acquiring a new customer is than keeping a current one.


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6-7x more expensive

Conversations on the Future of Business

Skate to Where the Puck Will Be


Hockey great Wayne Gretzky famously 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.

That can give you first-mover advantage. It can also position you to energize the customer 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 imperatives to achieving customer centricity. Among other strategies, you need to target each customer as a market of one. Engage customers as co-designers of your products, services, and brand value. And leverage emerging technologies, including Big Data, mobile, and social.

Understand Aspirations
As part of the creative process, artists sometimes ask, What does this piece want to become? Companies 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. Understanding desires tomorrow is much more compellingand 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 foreshadowing 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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Some of your experiments will fail. But for any of your bets to pay off, youll need to keep innovating and taking riskswith rapid prototyping and implementation so that you can quickly identify what succeeds.

Industry Dive: For the Love of Customers


For some industries the tenets of customer centricity are a natural. For others they might not seem so obvious. Banks, for example, tend to lack the e motional 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 payment 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 shopsand more important, trusted advisorsfor all financial needs. The way to capitalize on these channels is to optimize the customer experience across touch points. But for many industries, 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.

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, thats no longer sufficient. What companies require today are what management guru Don Tapscott calls the ABCDE of Marketing: anyplace, brand, collaboration, discovery, and experience. Whats more, targeting a market of one goes beyond mere one-to-one marketing. Customers want not just a personalized channel but also a personalized product and a personalized experience. That requires continual feedback loops to ensure youre capturing customer sentiments and using them to drive your value proposition.

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Conversations on the Future of Business

Engage Customers as Co-Designers


In the past, companies churned out products, and customers either bought them, or they didnt. Organizations that hit on the right product mix succeeded, and, all things being equal, those that didnt, failed. But customers are no longer satisfied to be passive recipients of a corporations conception of what they want. Instead, they expect to be partners in the offerings you bring to market and the value your brand represents. That starts with their ability to broadcast opinions through social mediaon a real-time, global basis. For companies that ignore this reality, the consequences can be dire. For those that embrace, theres an opportunity to better engage customers and glean valuable customer insights. Some companies are taking this a step furtherlike Starbucks with its My Starbucks Ideacreating their own social platforms to collaborate with customers. Such strategies reflect the emergences of the prosumerconsumers 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 behavioronly to create yesterdays customer experience. Instead, companies must capture emerging customer sentiment to truly understand customer motivations. That will enable them to craft a customer experience thats 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 available 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 create 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. Whats 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 DoubleDutchdrives higher and higher customer expectations.

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T-Mobile Engages Customers Like Never Before with SAP and the Cloud

The good news is that innovative companies can leverage these technologies to their advantage. They can better engage prospects, offer personalized 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 customerexperience edge. Todays 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.

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 theyre going to go in the future.
Bill Foulkes, Professor of Business/Rhode Island School of Design

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LEGO Group: Building a Bridge to the Customer


LEGO Group must be doing something right. The worlds 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.

The secret could be its loyal customers. But LEGO didnt 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 connective community who spend time on LEGOs collaborative online platform. And finally are active households that have purchased a LEGO product.

Moving Up the Pyramid LEGOs goal is to move customers up the pyramid. 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 countries, 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 wasnt always so customer-centric. But after suffering a $191 million loss in 2004, the company began to reorganize with greater customer focus. Today, all departments that have direct contact with

customers are centralized to ensure an optimum customer experience. The company also invested in enterprise software to support its customer centricity, including SAP ERP, SAP CRM, and tightly integrated loyalty-management software. Such integration is key: companies that closely integrate their applications achieve a 20 percent improvement in customer experience, according to Bloomberg Businessweek Research. Ultimately, the technology helps LEGO respond to customer desiresand drive customer loyalty and value. By involving consumers in the things they are really passionate about, they will become ambassadors for the brand, concludes Conny Kalcher, LEGOs vice president of consumer experiences. That is really powerful.

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Resources
Futureofbusiness.sap.com SAP Center for Business Insight SAP Business Innovation Blog: Customer Centricity Conversations on the Future of Customer Centricity

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