Fundamentals of Customer‐Focused Management

Citation

Dietz, J. (2005), "Fundamentals of Customer‐Focused Management", Journal of Consumer Marketing, Vol. 22 No. 4, pp. 233-234. https://doi.org/10.1108/07363760510605344

As a former student of Peter Drucker, I am well versed in the importance of understanding that a business exists to create a customer. This book begins and ends with several important points from Peter Drucker's seminal book The Practice of Management; in between, it gives more useful information on customer service techniques and theories than you would expect to find in a 200‐page book. The book offers evidence that “only with the proper understanding of the customer can a firm be customer focused” (p. xvi). That includes employees as internal customers, who are covered at the end.

There are six parts to the book and twelve chapters, with 33 figures and 18 tables, as the author takes the reader on a journey inside the care and feeding of the customer.

Part I is an “Introduction and overview”, focusing on service orientation and delivering superior value. “To make sustainable profits, firms must be able to continue to provide customer value at a cost lower than what the customer is willing to pay” (p. 7). The author points out “new technology is not the solution, but a way to enhance the solution”, as he adds, “Employee attitudes are less easily replicable” (p. 8).

Part II is “Understanding customer value and service orientation”, focusing on understanding what business you are in and the key to a sustainable competitive advantage. “Firms are forced to redefine their competitive landscape when they take the customer's perspective because they will find themselves competing outside their well‐defined spaces” (p. 22). John forces the reader to consider the customer “before, during and after the consumption of the product” (p. 29). He points out that all products come with some sort of service, and defines a service orientation (p. 37) as:

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  a philosophy or frame of mind reflected in the firm's culture;

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  an attitude to service the customer reflected in the firm's treatment of its customers; and

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  a view of services as necessary enhancements to any core product to make a complete solution”.

All books on customer service discuss the intangibility of service as one of its challenging characteristics. The inability to pre‐package services contributes to the fact that “every interaction with the customer provides or facilitates some aspect of the product bundle, and therefore the quality of the product is dependent on each and every interaction between the service provider and the customer” (p. 46). This leads to the special attention that should be paid to hiring and training, as happens, for instance, at Ritz Carlton.

Part III is “Managing customer information”, which discusses customer data, research, and customer knowledge management. “Customer‐focused firms must have good customer information to support the decisions and activities of the firm” (p. 57). The importance of knowing what customer‐buying patterns are and which customers are most profitable is imperative to make the most of research data and expense.

Observing and listening help obtain much consumer information. “The basic skill of listening involves competence in sensing, evaluating and responding. A study of 500 new car buyers found customer perceptions of these three dimensions to be strongly linked to trust in the salesperson” (p. 74). John goes on to point out that “sadly, the majority of CRM and ERP packages fail the firm not for lack of data, but simply because the firm does not have the appropriate understanding and appreciation of the fundamentals of customer‐focused management” (p. 76). Listening and understanding go hand in hand here.

Part IV, “Creating and delivering superior customer value”, covers superior customer value, managing the delivery process (think waiting time), and management of demand and supply. Readers who used to think that services such as two phone lines and Internet access were “extra” now learn that they are a commodity and have lost their differentiating ability. Firms now compete on supplementary products, and service is one of those products. A closer relationship with the customer also allows the company to gather data that can become a supplemental product, such as what amenities the guest would like at Ritz Carlton or what types of books an Amazon.com customer prefers. In terms of service failure, “smart firms have smart processes, that recover and learn from the failure” (p. 110). Firms develop a service blueprint that focuses on “critical incidents” that are most important to the satisfaction of the customer.

“Demand management should consider the timing of the demand as well as the profitability of the demand being served at all times “ (p. 127). John also covers the education of customers so that “behavior can be modified to the benefit of both the customer and firm with customer education on how demand fluctuations can affect their own customer experience” (p. 137).

Part V, “Managing customer relationships”, covers selecting and attracting customers, managing customer value and product quality, and customer defection management. “For its most valuable customers, the firm must guarantee superior service quality and customer service, with special attention to recovering from inevitable product failures when they occur” (p. 141). The idea of preventing customer defection receives justly deserved emphasis here, as does lifetime customer value. “It is evident that firms need to look at the acquisition costs and retention costs of its customer base when determining the focus of their retention efforts” (p. 158).

Most firms define customer satisfaction as the difference between customer expectations and experience. This book states that the factors contributing to that difference are the accuracy of the firm's understanding of customer expectations, the translation of the customer's expectations into product design, and the match between advertising and actuality (p. 165). The time a firm must spend making sure they translate customer expectations into their product mix has far reaching effects; it must include the empowerment of the people involved in the execution of the processes. An example is that “satisfaction with complaint handling is significantly associated with both trust and commitment that customers have toward the firm” (p. 181). I would encourage readers to examine this section twice.

Part VI is “Ensuring customer‐focused culture”. “The direct correlation between employee satisfaction and customer satisfaction is often underestimated” (p. 204). This is an appropriate way to end the book, because involvement of the entire company is truly what is necessary to get and keep satisfied customer.

This book is very rich, which requires the reader to pay close attention to the ideas. John uses a lot of graphs and charts, which add to the validity of his ideas. As he says in the beginning, these are not new ideas.

Who is this book useful for? I concur in part with the preface: “This book should be most useful to the professional who is well versed in the technical operations of a firms and would like to get a comprehensive feel of the customer‐focused perspective that is so often implied and assumed to be understood in business discussions” (p. xvi). The reason I say “in part” is because even the staunchest customer advocates need the type of reminder that this book offers. If a CEO, even a customer focused CEO such as Jeff Bezos of Amazon.com, were to read this book, he would obtain workable ideas.