Marsh

The following article is an excerpt from the Marsh report “Customer Centricity in the 21st Century: A Framework for Analyzing Strategic Risks and Opportunities.”

For the most part, the ultimate customer—the end consumer—isn’t happy with his or her experience. The annual assessment from the University of Michigan’s American Consumer Satisfaction Index for 2007 shows that overall satisfaction with retailers is down to 77 (from 81 in 2006) out of a score of 100. While it is interesting to contrast between who fared best (Amazon.com) and worst (Wal-Mart), the fact remains that the expectations gap is growing across the board.

To close the customer expectations gap, companies must reexamine their offering as experienced from the customer’s point-of-view. And that view often reveals a need to orchestrate a set of disparate events across a multitude of customer touch points, which represents both a risk and an opportunity for the enterprise. It is perhaps the single largest risk because failing to sense-and-respond to changes in customer expectations in a timely manner eventually leads to business failure.

Sustainable Customer Centricity Is About Successful Adaptation

Marsh looked at what may prevent a company from (a) sensing changes in customer expectations, and (b) responding in a timely manner. Figure 1 illustrates the four major components of Marsh’s customer centricity framework and how the critical linkages between them must be realigned as customer expectations change. Customer centricity, in the simplest terms, means putting customers and their expectations at the center of the business model and aligning the rest of the business processes around this core constituent.

The four components of the framework correspond to a set of core capabilities which constitutes a business platform for customer centricity. Although different parts of the platform may be owned and operated by partners, it is ultimately the responsibility of the enterprise that is making the brand promise to orchestrate all the components to profitably deliver on that promise.



Figure 1. Customer Centricity Framework

The Critical Links Represent Strategic Risks and Opportunities for Customer Centricity

As shown in the graphic above, failure in one or more of the critical links eventually results in customer churn (i.e., risk of customer defections):

Failure to sense risks/opportunities in the “expectations gap”: Customer centricity starts with knowing who is the “right” customer/segment, or in other words, your core constituency targeted by your brand promise that you intend to capture and defend against the competition. To ensure that the value proposition continues to resonate with the customer, companies need to continuously monitor the gap between their brand promise and their customers’ present and future expectations.

Failure to design/fulfill the right customer experience (for each segment): As consumers become more powerful, they are less interested in specific products or services and motivated more by experiences and outcomes. Thus, creating the right experience involves matching the right combination of products and/or services at each interaction throughout the customer lifecycle, delivered in a way that is consistent with the brand promise.

Failure to design/deploy the right value chain: Last but not least, the ability to deliver the right experience to the right customer at the right cost, right time, right quantity, right location, etc., depends on having the optimal network structure in place. This is where most of the inertia exists because a structural change to the value chain isn’t something you can accomplish overnight. Depending upon the degree of change, the realignment effort can take months and even years. Too often, the response comes too late and subsequently valuable market share is lost or worse, the business fails altogether.

Managing these critical linkages can be easy so long as the size of the business is small or the product/service is simple. But for large companies with several product lines serving diverse customer segments, it is a significantly more complex challenge. This is where the concept of a platform is important because when designed right it enables the business to address the multi-dimensional challenges of operating in a globally diverse market.

For more information, please contact www.marsh.com. For a full copy of the report, please e-mail: supplychain.intelligence@marsh.com 

Sree Hameed is a Senior Vice President in Marsh’s Supply Chain Risk Management Practice responsible for researching and advising clients on improving their risk management strategies in the areas of supply chain management and product lifecycle management. He also serves on the advisory board for the Center for Intelligent Supply Networks at the University of Texas at Dallas.