Dictatorship of the Customer

Customer dictatorship, by leading decision-makers to develop strategic blind spots, ie, neglecting profitable business opportunities, can threaten the very existence of a business in the long-run. Ask Pick 'n' Pay, the once undisputed giant of South African retail. Customer dictatorship explains why Pick 'n' Pay could allow Shoprite to grow into the most dominant retail force in South Africa. Today, long-run can be as little as five years or less. Developing strategic blind spots is a leadership behavioral issue. Addressing behavioral issues is one of HR's undisputed mandates.

To help you see the origins of this animal we are calling the dictatorship of the customer, allow me to in a general way celebrate the thoughts of one pioneering marketing thinker, Theodore Levitt. Levitt penned a hard-hitting essay entitled, Marketing Myopia. In that seminal piece, Levitt lashed out at the corporates for defining the business in terms of the products they were making. He called this provincialism. He cited examples of why giants of yesterday who, to illustrate, narrowly viewed themselves as being in the railroad business and not in the transport business failed.

When opportunities arose in air transport, they failed to seize them because their self-imposed boundaries had made them strategically blind. They became as well-rans. Levitt argued that the business begins with the customer and not products. Levitt's in-your-face piece spawned a revolution in business, with repentant corporates seeking ways of overcoming their product myopia through customer-oriented thinking.

One of the responses to curing product provincialism castigated by Levitt was the idea that you if you cut up clients into segments you could understand them better and along these lines make targeted investments in communications and service offerings. Unfortunately, in trying to cure marketing myopia, organisations developed another myopia -- customer segmentalism.

The maxim that business begins with the customer

In line with the maxim that business begins with the customer, organisations introduced market or customer segmentation.

Corporates began defining their clients according to predetermined criteria just as age, gender, habits, geography, lifestyle, social status, to cut a long story short on. It became fashionable to hear business executives talking of their focus on the "upwardly mobile urban go-getter male". With a laser focused attention to the needs of these so then-defined customer groups, the business was all things considered becoming the marketing organisation. Therein lay the seeds of the dictatorship of the customer.

With corporates when all is said and done "experts" on their chosen market segments, marketing technology would be used to fine-tune the business' understanding of the nuances of the clients' needs. In the long run, here was a fool-proof scientifically-determined winning formula. We were now experts of customer behaviour. So we thought. At the time Clayton Christensen zapped us across our corporate faces and made us rethink our approach to segmenting clients. I

n the 1990s, Christensen, who currently tops the Thinkers50 list, was puzzled that many leading firms fizzled into oblivion, surrendering to upstarts. At first, Christensen hypothesised big firms collapsed due to complacency. He was dead wrong, according to his technology data. To his shock, the big firms that collapsed were in fact very innovative, with substantial investments in technology and development. They were indiscriminately improving their products and marketing surveys were indicating that their clients were very happy. They were the blue chips. They were not being called blue chips in vain.

Massive price-to-revenues ratios, stock splits, raving reviews by investment experts in the leading papers affirmed that their business strategies were spot on. To furthermore complicate the puzzle, the executives in the big firms were aware of the new technological developments being introduced by new firms. The biggies even had the capacity to exploit the new technologies however consciously chose not to. It wasn't arrogance. Some executives in those big firms did commission in-depth marketing innovation to test the acceptance of these new technologies among their established clients. The marketing data was clear.

Buyer utility cuts across the artificial segments business cut up to focus their marketing activities. If one were to use this approach and overlay buyer utility on existing segments, one would discover pockets of clients not being served. If one combines these neglected clients on the basis of buyer utility, a whole ocean of clients are discovered.

Salesforce.com, the world leader in providing Customer Relations Management solutions upstaged Seibel, the once undisputed leader in the business. Seibel was a victim of customer dictatorship. Seibel saw itself as providing outsourced data storage solutions for the large corporates. Their clients required customised large scale on-site solutions to manage the massive data they generated. Salesforce.com, a tech start-up, looked at clients from a buyer utility perspective. They considered the buyer utility of convenience. "What if Salesforce.com could come up with an on-demand model of hosting client data?" Marc Benioff, the founder of Salesforce.com mused. Along these lines Salesforce.com was born using a radical business model, where customers would have their data stored on the service provider's servers and access the data over the web. No servers were to be installed at the client's premises. No software was to be installed in any of the client's computers. Salesforce.com later called this model "software as a service", popularly known as SaaS.