Customer-centric and Consumer-driven Brands

Customer-centric and consumer-driven brands - Martin Roll

With the immense power bestowed upon consumers by the Internet and an ever expanding means of communication, consumption and interaction, companies have been forced to rethink their branding and business models. In today’s ultra competitive marketplace, luring customers from competitors requires more than the dominant product-centric or company-centric model.

In most boardrooms today, growth strategies are driven by finance – a function which doesn’t necessarily have the customer as their primary focus. Even companies who are lead by strong research and development capabilities don’t always have the real needs of the customers as their top priority either. These companies make what they are able to, and then leave it to marketing, distribution and sales teams to push products on consumers.

Customers demand that brands provide an experience that makes them feel special in return for their loyalty and they expect those companies to come to them for input. If not, customers are becoming increasingly vocal and public in offering their feedback.

A customer-centric philosophy is an ideology – a value system where a company’s alignment of operations, production and internal controls are centred on consumers. Customer-centricity emphasizes long term interactive relationships by focusing on service, satisfaction and engagement – often in radically new or different ways. These activities include crowd sourcing, co-creation, social science and data-driven design.

In the last decade, CEOs have been ranking customers higher and higher on their list of factors that drive change in organisations. CEOs now place consumers second only to the C-suite in terms of their strategic influence. As a result, tomorrows CEOs, CMOs and CIOs recognise that they need help from the consumer to determine their path forward and are dissolving traditional barriers to engage them. Business leaders must understand the major benefits of customer-centric philosophies if they are to become consumer-driven.

Why customer centric?

There are 4 strategic reasons why businesses should aim to be customer-centric, and they must ensure that customers are taking centre-stage in all decisions:

Clarity: According to more than 1,500 global CEOs, the biggest challenge they face is complexity. However, less than 50% of these CEOs feel prepared for change, citing a lack of customer insight as their biggest deficiency. Coherent strategy requires clear direction. Customers are the only ones who can provide answers by understanding their present and future needs.

Design & development: The holy grail of customer-centric strategy is to anticipate what consumers need before they realize they need it. In a world of abundant choice, the purpose of branding is to guide consumers a midst a dizzying array of alternatives. True innovation can be the most powerful differentiator of all. With a customer-centric approach, product development and design will be more in tune with the needs of customers, enabling sustainable competitive advantage through consistent innovation over time.

Sales & marketing: Customer insights are enabling organizations to improve the timing and positioning of their marketing. Businesses now have the ability to predict customer needs by recognising patterns in their behaviours, and then tailor their brand communication, advertising and promotions to when buyers are most receptive. Other types of engagement can also allow for spontaneous and viral responses. The best advertising does not necessarily come from hired ad agencies and other marketing partners, but from empowered audiences.

Profitability: Ultimately, businesses are not charitable organisations – they exist to make as much money as possible. With data analysis and big data, leaders now have the ability to identify micro markets within their previously well-defined customer segments. Leaders can identify customers who matter the most in terms of dollar-value and propensity to renew, and better align resources to maximize business and brand opportunities. Boardrooms must get fully behind customer-centricity and emphasize customers in all strategic decisions when setting business directions, focusing on choices and allocating adequate resources. The outcome of these efforts will be enhanced revenue and profitability as leading key performance indicators.

Brand-driven business: Asking the consumer

The objective of a customer driven model is to enhance products and services and bring a brand’s total offer as close to the needs and wants of consumers as possible. One of the simplest ways to do this is to ask. While most companies would traditionally think to outsource such campaigns to a market research agency that would conduct face-to-face interviews, assemble focus groups or conduct online surveys, some of the most intriguing feedback comes from more innovative sources.

In an effort to inspire and design more personalised, human-oriented vehicles, the Chinese-owned car brand Volvo created a Facebook app called You Inside which asked drivers to share how they used the space inside their cars. By upload images of items inside their cars, describing how they were organised and sharing profile information about their lifestyle, the app inspired a number of subtle innovations for later Volvo models and, more importantly, a notable boost in customer appreciation and overall brand affinity.

Rather than asking consumers about their opinions, open innovation has become a great way to bring consumers into the design process by letting them get their hands on designing products, services and even processes themselves. Instead of asking consumers to provide firsthand accounts of what they need and want, they do it themselves, losing nothing in the translation. Most people use open-source technologies every day to organise their lives through Apple iPhone, Google Android or similar digital devices. These types of open operating systems have resulted in an almost endlessly customisable product experiences designed entirely by users rather than the smartphone manufacturers themselves.

The brand Lego, the world’s largest and most profitable toymaker based in Denmark, is famous for tapping its legions of fans affectionately known as AFOLs (Adult Fans of Lego) for new ideas and insights. The website has become a veritable production line where Lego fans from around the world can create their own models, write project descriptions and support proposals for Lego sets created by others. If a submission receives 10,000 votes within a specified period of time, the project is reviewed by designers and marketing representatives from Lego, then turned into real Lego products.

Solution competitions like the Lego initiative can also inspire creativity and outside-the-box thinking from hidden sources. Food and beverage companies such as Ben & Jerry’s or 5-Hour Energy often hold flavour competitions while, in the technology world, brands can turn to start-ups such as Kaggle to expose their challenges to a global community of data scientists who compete to solve problems.

Regardless of how brands go about soliciting customer feedback, there can still be major drawbacks to asking consumers what they want. Human beings are creatures of habit and can become so accustomed to current conditions that it is difficult to think of radical solutions that do not currently exist.

Steve Jobs never asked global consumers what they wanted and he did not bother asking them. Jobs believed that people would not necessarily know what they really wanted if asked. They would not be able to envision what products and services they aspired for in the future, so Steve Jobs believed it was up to businesses to be innovative, get out of the ordinary thinking and envision the future. Only that way could brands become truly unique and unbiased from mainstream mindsets and common beliefs. Steve Jobs certainly proved the point with the tremendous success of the Apple brand and the imaginative products and services he brought to life during his watch.

Despite willingness to provide answers, the truth is that people do not always know what they desire and aren’t always able to recognise what persuades them. Because most of human decisions are unconscious, brands should also be independently observing customers to understand what drives them rather than simply asking.

Business insights: Observing the consumer

Companies must seek to analyze and improve their user experience using the subjective and participative techniques described above, but also more objective data-driven methods to gain business and brand insights. There are two main methods of gathering objective data. The first is the study of human behaviour through anthropological observation. The second is through number-crunching, deep analytics and big data. A balance between these quantitative and qualitative collection methods is required to become successful.

Anthropological observation: To understand what makes customers tick, business leaders sometimes have to observe them in their natural environment. People react to their environments in subtle, often unconscious ways, so social scientists must always be concerned with how controlled environments such as focus groups and questionnaires skew results.

Lindsay Owen-Jones spent over 30 years with French cosmetics and skincare conglomerate L’Oreal as CEO and chairman of the board. He was notoriously obsessed with multiple customer insights, and spent a significant proportion of his executive time on the road visiting, interviewing and observing global L’Oreal consumers in their natural environment. These insights along with Lindsay Owen-Jones’ visionary leadership were the two main drivers of his success, and the secret behind the global rise of L’Oreal.

Chairman of the board and CEO of Procter & Gamble, A. G. Lafley, has followed a similar path with consumer insights, and also always focused intensively on innovation in all aspects of business.

Through the late 1990s and early 2000s, Lego’s attempts to combat the rise of video games by becoming a lifestyle brand led the Danish company to become over-diversified and near bankrupt. The Lego company is fully owned by the original founder family, and the chairman of Lego, Kjeld Kirk Kristiansen, decided to change the course significantly. Kjeld Kirk Kristiansen brought in global management consulting firm McKinsey & Company to help facilitate a new successful business strategy for Lego. The McKinsey team comprised a young Danish consultant, Jørgen Vig Knudstorp. He quickly got the watchful eye of the ambitious chairman and the board, and Jørgen Vig Knudstorp was hired into the internal strategy team of Lego along with other McKinsey colleagues.

When Jørgen Vig Knudstorp was appointed CEO of Lego in 2004, he pledged to get closer to Lego consumers who had lost their connection with the once famous brand. Jørgen Vig Knudstorp realized that Lego needed to better understand the phenomenon of play and creativity among both adults and children. The art and skill of play and creativity are the core competences of Lego. Therefore, the new CEO dispatched “anthro-teams” (teams of anthropologists) across Germany and the United States to observe customers in the comfort of their own homes, shopping with them and listening to their stories. The Lego CEO Jørgen Vig Knudstorp would use all these important consumer insights to steer Lego towards the success enjoyed by the brand today.

Lego researchers found that their consumers were very different from what was previously understood from focus groups. Having been invited to participate in controlled playtime or to test prototype products, focus group participants were not playing the way they would at home, but drawn to the newer systems they thought they should be playing with, thereby giving Lego false positive results. Previous research results and insights were highly biased.

The most vital insight from Lego’s embedded anthropologists was of what made Lego so beloved. Lego users play with Lego for the freedom to experiment but also to achieve mastery of their building skills. Lego is a medium rather than a toy. From a pile of simple, interlocking, coloured Lego bricks, any exciting adventure could easily be created. Thus began Lego’s return to making Legos for people who loved them for what the Lego brand stood for. By going “back to the brick”, refocusing on core Lego products, and divesting the business units not essential to their customer’s core values, the Lego company and the new CEO Jørgen Vig Knudstorp began its return to profitability and valuable brand equity.

Technological analytics: The quality of insight about customers has become increasingly reliant on big data and analytics. So much of a global brand’s future success now depends on how they manage the mobile, social and digital revolution. Brands from anywhere in the world can now develop strategic roadmaps based on the most precise information that has ever been available and the highly innovative ways of colleting it 24/7 and in real time. In this new age for brands, organisational structures should be changing along with their capabilities, making information technology, data analytics and big data an extension of branding and part of a company’s DNA and culture.

The most popular and obvious area for brands to gain insights for better decisions moving forward is through the intelligence gathered from digital and social media. It is no coincidence that some of the most innovative companies are those that are tied closely to social media and have fully embraced the digital revolution. Historically, companies and brands have allocated resources based on gut instinct, emotions and often anecdotal evidence, but deep data analytical capabilities now provides decision makers with much richer consumer and market insights.

Brands are carefully listening to social media. Sentiment analysis software has now become advanced enough to interpret emotions behind written words using natural language algorithms and searching all corners of the internet to understand how people feel about brands. Aside from becoming more reactive to crisis, such tools are also providing an important platform for long-term strategic decision making for boardrooms.

The technology and tools for collecting data outside of the internet are getting more creative. High tech mannequins fitted with facial recognition software, for example, can now collect visual retail store data to track the age, sex and race of fashion retail customers so that companies can react accordingly. The increase in willingness of customers to wear sensors on their bodies, in their homes and offices are also proving a treasure trove for brands.

Elevating marketing: The CMO and CIO as a team

To create a truly customer centric organisation, the Chief Marketing Officer (CMO) and Chief Information Officer (CIO) roles must become much more prominent than they are presently in many global companies. Marketing continues to be an isolated silo within many organisations. Their traditional domain – the tactical 4P framework which includes pricing, place, product development, and distribution – began to be taken over by finance, engineering and operations departments. As a result, marketing has often become relegated to selling the products manufactured by the company’s product-centric approach. At the same time, boardrooms and executives have become much more insulated from the voices of their customers. Today, marketing plays a role in leadership and innovation in only 39% of global firms as marketing focuses more on short-term sales than long-term corporate health and brand equity.

Business leaders must have a stronger customer focus which the combination of CMOs and CIOs can uniquely provide. Together, the CMO and CIO are an extension of the customer within the organisation and should earn a seat at the table where the future of the business is determined. Such a change requires not only a courageous CEO, but a CMO and CIO who recognise the paradigm shift required. This shift is a big change and requires hard work to make it happen successfully.

To become a customer centric organisation, the CMO must take responsibility to make consumer and brand relevance key to every department and to all company-wide decisions. Since every transaction and data-point passes through various company systems, the CIO is the person who best understands where technology is going and how it can be applied effectively. Both the CMO and CIO roles should no longer be about deploying strategy or technology as handed down to them, but as strategic sources of innovation, transformation, revenue-generation and customer satisfaction to build and sustain brand equity.

Together, the CMO and CIO roles are poised to lead brands through this change if they embrace new responsibilities and are given the leadership authority and prominent voice within the organisation to do so. Marketing must become more than advertising, and be elevated to the boardroom alongside a renewed strategic focus on technology.

The need for greater customer centricity in Asia

There are very few Asian brands on the global stage. Part of this reason is because a large part of Asia’s economic development until now can be attributed to low-cost advantages and outsourced manufacturing. As a prime example, even though China led all emerging markets with 89 companies on the 2013 Fortune Global 500 list of the world’s largest companies, China did not have a single representative on global brand consultancy Interbrand’s list of the top 100 global brands.

While Asia’s cost advantages have enabled home-grown Asian companies to gain market share, low cost alone no longer provides a significant long-term advantage. The intense cut-throat competition in many global industries has resulted in tremendous pressure on margins, hence forcing companies to look for additional measures to survive and grow their businesses. When 250 senior executives of Asian companies expanding overseas were asked to compare their source of competitive advantage in three years compared to today, 55% cited high quality products and services, while 47% cited high-value innovation. Only a small minority thought low-cost operations would be an advantage in three years’ time.

Asia is still the world’s biggest provider of commodity products. To break out of this shell and see the emergence of strong and inter­national Asian brands, customer centricity must become the core of Asian brand strategy. The Asian boardroom and executives need to step up to the challenges and let marketing take centre-stage in their companies. A constant dialogue with customers and attention to their needs above all is the next frontier for Asia to compete globally, sustain competitiveness and master customer loyalty.

Samsung, Hyundai, Amorepacific and Singapore Airlines are prime examples of Asian brands which are fairly customer-centric and brand-driven, but many more Asian companies need to follow.

Conclusion: Gain customer insights

Understanding consumers is the key to future strategy, improved design processes, marketing effectiveness and financial profitability. Instead of the traditional product-centric business planning process, tomorrow’s sustainable brands must align their operations, production and key talent around consumers as their most important asset.

A delicate balance of methods to gain customer insights is required to become truly customer-centric and avoid the challenges that many boardrooms and organisations face when making the necessary transition. They need not only asking consumers what they want, but need inviting them to participate in the process to inspire loyalty and creativity. Taking a step back from direct involvement and gathering objective insights with data analytics and anthropological research is also necessary to complement these insights effectively. The Lego brand is a good example of this.

Becoming customer obsessive is the only strategy to become an iconic brand, consistently providing customers with what they desire today but accommodating future needs before customers realise they have them. Steve Jobs was a great example of a leader who anticipated the future and executed a customer-centric and brand-driven business strategy. Many more global business leaders should follow his example to ensure their companies become customer-centric and brand-driven.