Why do Customer-Centric Organizations Fail?

In an earlier post on customer-centricity I had argued that executive reviews rarely go beyond the numbers (revenue, subscribers, traffic, etc.) and fail to capture a more powerful growth engine – our customers. But, what if our strategies are built around customer success, yet the goals are not achieved? 

There could be a multitude of reasons namely, market saturation, competitive pressures, product quality, marketing success, operational effectiveness, etc. While most of the listed here may be in play, in some form or the other, I want to bring our attention to “operational readiness.” 

We can hire the best consultants to design our product, consumer and marketing strategy, but it is our operational readiness that will determine how well we deliver on this strategy. 

Let’s take an example, we have our corporate mandates such as; expand our footprint, diversify our product offerings, increase ARPU, reduce cost, sign a new partnership, etc. We conduct due diligence, come up with a strategy to achieve that objective, and with a fancy deck, will have all the approvals needed for a launch. However, there is often a need for "incremental investments" and a shift from "corporate ways" that are critical for our operations to deliver. 

In my experience at leading new product launches and customer-facing site enhancements, the build phase often springs up unexpected surprises that either cause delays, or force a go-ahead with a compromised product/service features. These could be in the form of systems and process updates (may require capital investments), shift in strategy to offer a "beta" version of the product, shrink the scope of support offered through CRM, etc. As a P&L manager, it is important to highlight the larger gains and keep the project ROI positive and within acceptable range.

A well thought out and “realistic” implementation plan should be integral to the strategy deck for a new initiative. 

So, don’t underestimate the value of conducting due diligence and investments around building operational capabilities to meet the strategic goals. That is one activity which will significantly impact the success of; new product launch, analytics integration, a website redesign, and systems upgrade, etc.  

The bottom-line is that the cost of an unsatisfied customer is far too high to under-estimate the costs of poor delivery. 

In one of my client engagements, I had to re-evaluate the product features and SLAs that were agreed upon with the partner, as these were leading to customer complaints and unacceptable levels of churn. Part of the strategic redo included a better communication collateral for sales and marketing channels. The compromises made during the launch to meet the deadlines would come back to bite so quickly - no one had imagined! 

Align Sales Strategy with Customer Growth Strategy

Kind of obvious – isn’t it? After all, sales are meant to grow the customer base! But not so fast.

Sales organizations are by default programmed to increase their numbers period over period. However, quality has a different task – to retain the customers and optimize inflow such that churn is reasonable and within industry benchmark limits. So more is not always better! As we evaluate the quality of customer intake, we should also be cognizant of its downstream impact. Sales-only focus, beyond a certain threshold, invariably leads to greater customer dissatisfaction, higher churn and lower revenue for the organization.

In a recent test, changing the incentive plan on sales of price differentiated products led to a dramatic shift in customer take rate and early-life churn. In essence, the metrics improved, as the product was more aligned with customer need, rather than which one offered more commission to the sales agent. Aligning our sales with customer needs usually leads to a happy customer, which in turn, promises to deliver a greater Life-Time Value (LTV).

The analytics for assessing customer growth, therefore, should look at optimizing a wider set of determining factors, including; sales drivers, product/service pricing and customer segments. I shared some insights into a similar strategy for subscription based businesses. However, the sales and customer growth optimization discussed above is bound to benefit any organization that thrives on long-term contracts with its customers.

Managing a Subscription Business – Do’s and Don’ts

As a proverbial “last mile” service provider, we have the privilege of working directly with the consumer and helping them fulfill their needs through add-on products and services portfolio. Typically, these are offered as a bundle or stand-alone, depending on the strategic provisions and consumer preferences.

For instance, cable companies may bundle their core service (video) with telephony, Internet, security, etc. Recently, a lot of research has been published, particularly as it pertains to Internet-of-Things (IoT), on what other services and products may be eligible for a place in the portfolio, such as, digital health, premium technical support, hardware, premium content, among others. As general managers (GMs), we have to hence consider a variety of factors when creating a portfolio that delivers “net” subscriber growth, and suits the company goals, core product offering and consumer preferences.

Here I want to share a few key findings – do’s and don’ts – about the “consumer preferences” that shape how well we forecast subscriber and revenue, and in turn, the portfolio performance.

• Do promote multiple products at the time of acquisition, as long as they complement the core offering.
• Don’t overload however – too many decisions at the time of initial purchase will usually put off the customer, and you may stand to lose a customer of your core product.

• Do consider pricing when offering multiple products at the time of first sale. Total price that a customer can commit to, requires an in-depth understanding of your target customers and their ability to afford the payment commitments.
• Don’t over-sell the products with higher price points. This may result in a good initial ARPU, but also causes churn sooner than predicted.

• Do take the buyer’s remorse into account, since most churn occurs within the first 30 to 90 days of subscription. The above factors usually contribute to it, besides the product/service quality delivered. After the first 90 days, the pattern sets in and customers are usually comfortable with the product, pricing, etc.
• Don’t over-emphasize the value delivered by your complementary products/services. It is OK for the customer to be a loyal subscriber to your core product – there will be other opportunities to up-sell and cross-sell.

• Do model and plan acquisition and retention targets that are consistent with industry standards and account for the unique motivations of your target market. For example, product “x,” may sell better in urban vs., rural market, or how easy it is for a customer to buy a complementary product through other vendors, etc. Model out the optimum product/price mix, based on customer propensities and limitations.
• Don’t set unrealistic expectations on acquisition and retention metrics. With more products in the portfolio, acquisition targets may need a revision. Similarly, retention is a challenge, if the customers are not happy with the quality or pricing, or are too invested in your portfolio.

I am sure there are more factors that may warrant a consideration and with continuous data analysis (Big Data anyone?), we may be able to further refine our approach to growing the subscription business, while maintaining a healthy product mix, margins and customer satisfaction.

Connected Home and Bundling for Telecom Providers

Content consumption across devices is pushing the boundaries of Internet and how providers manage bandwidth. File sharing, video streaming, always-on kind of experience puts pressure like never before on the current infrastructure. This applies to all cable, DSL, mobile and satellite internet providers. These organizations have to not only fight the price suppression on their Internet services, but also continue to grow revenue by offering value-added services. As Internet access marches towards being a commodity and consumers demand “unlimited access plans," research is starting to come out on how can companies engage with their customers and gain a greater share of their wallet.

This is where bandwidth providers need to think bundling of various services to offer “value” to a consumer, who is not only cost-conscious, but also, is consuming a variety of online products. My recent success with selling data, security, device management and voice bundles is the case in point. We have seen a two-fold increase in product penetration across these categories, upon introduction of bundle pricing and options. In addition, companies, such as, Comcast, Cox, Time Warner Cable, Dish Network, etc. are already offering some combinations of these bundles, along with their video offerings.

Premium technical care is another area that is finding a great appeal among customers across a wide spectrum of technology and geography. Consumers want safe online browsing, keep their devices in top gear and have someone ready to help when their connected home needs troubleshooting. I have successfully tested enhancing the value of Data plan, with Video (if applicable), online safety, device management, voice (VoIP) and technical support options. The gains in customer satisfaction and reduced churn will easily offset the pressures of providing more for less, when it comes to data services.

A recent study published by Pew Research mentions paid technical support and online health services as one of the top growth areas for consumer adoption. I am already seeing interest in the former, but how is the latter going to perform, remains to be tested. Access providers, in the meantime, could be exploring options through customer surveys and research that helps them build a brand and exploit the market, when primed.