The Customer Revolution: How to Thrive When Customers Are in Control

The Customer Revolution: How to Thrive When Customers Are in Control

by Patricia B. Seybold
     
 

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You are no longer in control of your company's destiny . . .

It happened in the music business and it will happen in yours. It's only a matter of time. Customers actually take control of an industry and reshape it from the outside in. Customers decide that the way they want to use an industry's product doesn't fit the current business model.

Patricia Seybold,

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Overview

You are no longer in control of your company's destiny . . .

It happened in the music business and it will happen in yours. It's only a matter of time. Customers actually take control of an industry and reshape it from the outside in. Customers decide that the way they want to use an industry's product doesn't fit the current business model.

Patricia Seybold, author of the influential, bestselling Customers.com would say that that's a revolution. Thanks to the Internet and to mobile wireless devices, both business and consumer customers are demanding that you change your pricing structure, distribution channels, and the way you design and deliver products and services. Your business must be transformed so that it is completely customer-centric, or you will be out of business.

Her advice to companies facing the customer revolution? You can fight it if you want, just as Don Quixote fought imaginary windmills and thought he was winning battles. But naturally he lost the war and so will you. Better, says Seybold, to practice "sweet surrender," just as the music industry has started to come to terms with Napster. In the words of one music executive, "Thirty-eight million people can't be criminals."

Many try to characterize the changes taking place as the New Economy, the Internet economy, or the information, knowledge, or bio-economy. There's a grain of truth to all of these descriptions, but they fail to get to the heart of the changes taking place. Simply put, what we now have is a customer economy and it's going to result in changes that you would not have thought possible even a few short years ago.

Patricia Seybold has been on a worldwide quest to find the companiesin North America, Europe, and Asia that are developing the state-of-the-art practices that will help them win in the new era of the customer economy. They're profiled and analyzed in case studies ranging from small businesses to multinational giants and range from manufacturers to retailers, and service firms. They include financial services giant Charles Schwab, the British Vauxhall Division of General Motors, Snap-on Tools, custom backpack manufacturer Timbuk2, Hewlett-Packard, Medscape, and W.W. Grainger.

As she so ably demonstrated in Customers.com, Patricia Seybold is ahead of the curve. For most companies, the issue of customers in control is just coming onto the radar screen. In The Customer Revolution, Seybold makes it plain that this can be either your biggest problem or your greatest opportunity. What she provides is not only a brilliant analysis but also a practical program for how you can make the customer revolution a profitable one. The companies that thrive in the customer revolution will be those that measure and monitor what matters to customers, in near real time.

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Editorial Reviews

bn.com
The Barnes & Noble Review
Just because the Nasdaq has lost half its value in a year and the market capitalizations of the leading e-commerce and technology companies are mere shadows of their former selves, doesn’t mean the dot-com revolution is over. In fact, things are just heating up. For this reason, Patricia Seybold's latest book, The Customer Revolution, is a must-read for everyone in a decision-making or decision-implementing capacity at both bricks-and-mortar and web-based businesses.

Since the first big Internet bubble burst, both venerable and fledgling e-companies have been set adrift on the sea of viability. The potential for success is more remote than before, and companies need to leverage everything in their power to turn a profit and stay afloat. While many things have changed and many rules have been rewritten since the heady days of 1999, one key point has risen to even greater prominence: the importance of the customer experience.

Just look at the furor over peer-to-peer file-sharing technology, such as the software used by Napster. The debate over Napster is largely considered to be about intellectual property and copyright infringement. But another controversial aspect to the Napster issue exists. With the advent of Napster, companies have seen how a new technology can enable customers to force established companies to rethink the way they do business. That a renegade company could command the attention of the world, divide public opinion, and garner investments from a preeminent venture capital firm and a multinational media company speaks to the supreme importance of the customer in all business models.

Not surprisingly, Seybold, a technology consultant and bestselling author, begins The Customer Revolution with a discussion of Napster. She does not mince words in stressing the importance of the lessons of Napster to all businesses, breaking out the key points in a chapter called, “What Happened in the Music Industry Will Happen to You.” One universally applicable theme of the Napster debacle is that customers will want to reappropriate a company’s wares to suit their own needs. If a business can anticipate that desire and design a strategy that accommodates it, that business can succeed.

Customers.com, Seybold’s previous book, canonized a customer-centric philosophy of business. To great acclaim, Seybold guided decision makers and policy implementers towards a new way of doing business, advising them on how to turn their businesses into customer-friendly dot-coms. Using case studies and point-by-point strategies, Seybold’s lessons for successfully bringing businesses online were heard at companies around the world.

The Customer Revolution will not disappoint fans of Seybold’s school of thought. It extends the principles of Customers.com into this next, turbulent phase of the e-commerce revolution, advising readers to learn from the veterans of the customer revolution. Based on her vast experience with Fortune 500 companies, Seybold has broken down the mechanics of customer success into three principles: 1) Customers are in control, and they’re reshaping businesses and transforming industries; 2) Customer relationships count, and therefore the value of your present and future customer relationships -- your customer franchise -- will determine the value of your company; 3) Customer experience matters, so the feelings customers have when they interact with your brand determine their loyalty.

More simply, Seybold says, “Gone are the days when you simply made and sold products. Now you need to attract and retain customers.”

The first half of The Customer Revolution is devoted to explaining each of the three principles of customer success. In addition to the discussion of Napster, Seybold also examines the open-source Linux technology and the self-policing marketplaces of the eBay auction site as examples of revolutionary, customer-driven business models.

Seybold outlines “the digital dozen,” 12 customer demands, all enabled by technology, that businesses must meet in order to be successful. While most of them are logical extensions of the themes outlined in Customers.com, the increased demand for convenient access, including the demand for mobile wireless access, is an important addition to Seybold’s comprehensive understanding of consumer needs and psychometrics.

The second half of The Customer Revolution offers “an operational framework” within which to apply Seybold’s tenets, including eight steps to a “great branded customer experience.” The eight steps are: create a compelling brand personality; deliver a seamless experience across channels and touchpoints; care about customers and their outcomes; measure what matters to customers; hone operational excellence; value customers' time; place customers’ “DNA” at the core; and design to morph. These steps are interspersed with very interesting, relevant case studies from companies such as General Motors, Charles Schwab, Hewlett-Packard, and National Semiconductor.

Seybold is the perfect tour guide through the often overwhelming world of e-business. Her experience, perspective, and advice are invaluable, and no doubt soon will be as au fait to the pioneers of the next wave of the dot-com revolution as Customers.com was to its initial trailblazers. (Emily Burg)

Publishers Weekly - Publisher's Weekly
The quality of a company's customer relations with today's better informed, more demanding consumers will determine its future success, contends Seybold, a consultant and author of the bestselling Customer.com. "Thanks to the Internet and to mobile wireless devices... customers are challenging and disrupting the standard practices in virtually every industry.... They won't be denied. They have power and they know it," she writes, pointing to the music industry as an emblematic crucible of change. Variations on this argument have been proposed for more than a decade, but Seybold asserts that it holds true for all industries and throughout the world. To help managers capitalize on this inevitable shift, she lays out three "principles" ("Customers are in control"; "Customer relationships count" and "Customer experience matters"). Drawing on 14 case studies of companies from Charles Schwab, Hewlett-Packard and Tesco to Finland's largest bank and the apparel manufacturer Timbuk2 Designs, she also offers eight steps for achieving success in this new environment, such as "Create a compelling brand personality" and "Value customers' time." But like any true believer, Seybold tends to get carried away. She directly attributes the recent turmoil on Wall Street to an ongoing customer revolution though value investors might disagree and blithely predicts that in less than five years "investors will be actively assessing the quality of companies' customer relationships." Still, her worthwhile central points come through loud and clear, and her arguments could help frame future market debates. (Apr. 3) Forecast: Seybold's solid track record, a national print ad campaign in the Wall Street Journal and the Industry Standard and an NPR sponsorship should help this book garner strong sales. Copyright 2001 Cahners Business Information.
Library Journal
Seybold (Customers.com) says merely thinking that all a company has to do to assure success is make products that people like is no longer relevant in what she defines as today's "customer economy." Using examples of current peer-to-peer networking (Napster.com), open-source coding (Linux), and self-policing (eBay), she explains the principles of the customer-driven economy and details how any organization can adapt to this transformation that focuses on a customer-centric vs. venture-capital approach to business. Well-known firms like Hewlett-Packard and Charles Schwab are but two of the companies that have overhauled their internal operations driven by customer metrics, e.g., retention rates and the costs of acquiring new customers. The integration of how cutting-edge technology has influenced the new "customer economy" and Seybold's impressive narration will get the listener's attention to this important work. Highly recommended for all university libraries supporting a business curriculum. Dale Farris, Groves, TX Copyright 2001 Cahners Business Information.

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Product Details

ISBN-13:
9780609607725
Publisher:
Crown Publishing Group
Publication date:
03/20/2001
Edition description:
1 ED
Pages:
416
Product dimensions:
6.40(w) x 9.50(h) x 1.30(d)

Read an Excerpt

Chapter 1

Embrace the Customer Revolution and Thrive in the Customer Economy
Fasten your seatbelts! The turbulence you've been experiencing in the stock market isn't over yet. In fact, it's probably going to get worse.

Why? Because we're in the midst of a profound revolution. And it's bigger than an Internet revolution or a mobile wireless revolution. It's a customer revolution.

Customers have taken control of our companies' destinies. Customers are transforming our industries. And customers' loyalty — or lack thereof — has become increasingly important to executives and investors alike. If you try to understand the ups and downs of the current economy by focusing on technology trends and investment fads, you're going to miss the true underlying shift that's underway. Customers are in control. They're changing the face of business as we know it. And your company's value is in their hands. Your customer franchise has suddenly become the scarcest and the most crucial resource for your business.

What's more, your company is probably at risk. Unless you act now to focus on the quality and consistency of the customer experience you offer, your firm will be hopelessly lost in the turbulence. Other companies — like the ones described in this book — have quietly reorganized themselves to manage by and for customer value. They measure and monitor what matters most to customers. If you continue to operate your business using the metrics of the old economy, you're going to be left standing on the ground as your competitors take off in the customer economy.

Listen to the Beat of the Customer Revolution

Over thepast year, executives in a variety of industries have begun to feel the impact of the customer revolution. Let's listen to their stories:

Arne Frager is the president of The Plant, a professional music recording studio in Sausalito, California. Arne's been in the music business for twenty-seven years and he's never seen the flow of new music dry up before:

"My recording business is off 50 percent. The whole music recording business is off 50 percent this year (2000). About half the revenues in our industry come from new acts. But the big record labels are so paralyzed by the MP3/Napster/Gnutella/Freenet free distribution of digital music that they're not signing any new acts! Without the labels paying for the production of new albums, our studio isn't recording."

Customers, taking matters into their own hands, have profoundly altered the landscape of the music industry.

Brennan Mulligan is president of Timbuk2 Designs, a U.S.-based manufacturer of backpacks and messenger bags:

"Customers love the ability to custom-design their backpacks. But there's just no way to convince retailers to take custom orders in their stores. They can't handle one-off products. So we'll go direct to the customer and do it on the Internet. Customers can design their own backpacks, we'll ship them out the next day, and if the retailers want to participate we'll set up shop on their Web sites and put kiosks in their stores, too!"

Customers want capabilities that retailers haven't been able to offer. Now manufacturers are responding to customers' desires.

Gideon Sasson, executive vice president of Electronic Brokerage, Charles Schwab & Co.:

"Before the Internet, companies used to talk about how to lock the customer in. They thought about how to 'own' the customer. They incented customers. They brought them in, and then they worried about, 'How do I make a profit with these customers' and 'How do I get them to buy this product.' But companies can't afford to think that way any more. Even before the Internet, at Schwab we realized that if we do the right thing for our customers, they'll reward us. But other companies are facing a rude awakening. Before the Internet, companies could be customer-aware, but they didn't have to be customer-centric. Now they have no other choice. The Internet is forcing everyone to behave differently. What the Internet did was to move control to the customers' hands. People say, 'Your customers are only a mouse-click away from the competition.' Actually, the more important fact is that they're only a mouse-click away from other customers who will give them the real skinny!"

Customers are no longer willing to be locked in. They want great service, fair prices, and innovative offerings. If they don't get these, they'll go elsewhere, and they'll tell the world.

Sweet Surrender

You're no longer in control of your company's destiny. Your customers are. Thanks to the Internet and to mobile wireless devices, customers are now armed with new, more convenient tools with which to access our businesses (as well as those of our competitors) around the clock and around the globe. Business and consumer customers are challenging and disrupting the standard practices in virtually every industry. They're demanding that we change our pricing structures, our distribution channels, and the way we design and deliver our products and services to them. They won't be denied. They have the power and they know it. Companies that don't "get it" will be out of business soon.

Like most revolutions, this can't be stopped. We can't turn our backs on it. We have no choice but to surrender gracefully. Customers have always been the raison d'être for businesses. But now, for the first time in the history of modern business, we have the wherewithal to detect customers' needs in near-real time and to adapt quickly to their changing desires. Using the Internet, we can now reach out to new customer segments to test new offerings, innovate, and experiment more rapidly than ever before. Using the power of the 'Net, customers are inventing and refining new business models, including peer-to-peer file-sharing (Napster), open-source design communities (Linux), and self-policing marketplaces (eBay). Instead of resisting these customer-led business models, we need to embrace and extend them.

Surrendering to the customer revolution is a winning proposition. Our employees want to be customer-focused. Customer-centric companies have a much easier time attracting and retaining employees because companies that have a strong, unwavering customer-focused culture are much more fun to work in than those with warring, product-centric fiefdoms. It's much easier to make budget decisions based on customer priorities than it is to argue over product-centric goals and objectives. What's more, the companies that focus on building and sustaining relationships with customers are the most profitable companies in the world.

Welcome to the Customer Economy

This new customer economy is also spurring a new way of measuring company valuation. We have historically measured businesses on their use of investment capital, primarily through their return on fixed capital assets. High stock prices went to firms that extracted the most profit and growth from tangible assets or that owned the most valuable assets. Most general managers cut their teeth on such primary management indicators as profit and loss (P&L), return on assets (ROA), return on investment (ROI), return on capital employed (ROCE), and price-earnings (P/E) ratios. These performance disciplines are well established and important. Ignore them at your peril! Yet management is the art of the best use of scarce resources. Investment capital is no longer our scarcest resource.

In the customer economy, loyal customers have become the most precious commodity. Today the hardest thing for a company to acquire is not investment capital, products, employees, or even a brand. It's customer loyalty. Customer relationships are the fundamental source of value in the new customer economy. Customer capital is now at least as important as investment capital. And the value of your present and future customer relationships-your customer franchise-will determine the value of your company.

Managing By and For Customer Value

The seismic impact of this customer revolution is being registered by the world's stock markets. If you look below the surface to distinguish those stocks that are doing well from those that are languishing, you'll discover something important: the most highly valued companies are managing themselves by and for customer value.

Investors and financial analysts may not yet have articulated the importance of customer metrics for the companies they follow, but the executives who are running these companies know how important their customer relationships are to their future earnings.

It's customer metrics that matter to companies like Charles Schwab and Cisco Systems, not just P&L. Schwab and Cisco have consistently delivered revenue growth, after-tax profits, and return on equity year after year. They're examples of the many companies you'll be reading about in the following chapters that watch their bottom lines but run on customer metrics. In fact, that may be the most surprising finding in the research behind this book. The measurement systems that leading consumer-oriented and business-to-business companies are using to manage their businesses internally have shifted. If you ask them, you'll discover that the real leaders in today's economy run their businesses based on things like customer retention, customer satisfaction, growth in the number of customers, growth of customers' spending, and the predictors of customer defection. These metrics have become the major focus for weekly and monthly management meetings.

Look at Cisco's CEO, John Chambers. John spends 80 percent of his time in conversations with customers. Through speeches, visits, phone calls, executive briefings, and strategy sessions, he is taking the pulse of his customers constantly. He also personally reviews the interactions Cisco has had with its top customers every day. And he requires every Cisco executive to spend 50 percent of his or her time face-to-face with customers. Whether you're the CIO or the CFO, you aren't doing your job at Cisco if you aren't spending time talking with customers. Every Cisco employee knows what customer satisfaction goal she needs to beat in order to make her bonus — she walks around with that number in her head (and on her badge) every day. This approach really works. Every year Cisco's employees beat their customer satisfaction goal and set a higher goal for the next year.

The leaders in the customer economy understand that a laser-focused, customer-driven culture combined with a few key customer metrics are driving their revenues, their shareholder value, and their long-term profitability. Do you?

How to Survive this Profound Revolution

What should your company be doing to ensure that it will survive and even thrive in the customer revolution? How should you guide your business through the turbulence ahead? The first thing to recognize is that this revolution doesn't pertain only to e-businesses. Every business is now an e-business. Virtually every business on the planet now has ways for customers and suppliers to interact electronically. Second, you need to realize that there are no e-customers, only customers. At some point in time, every business or consumer customer may need to interact in different ways-by talking to knowledgeable people, interacting with your retailers, sending an email, picking up the phone, transacting via a hand-held device, or doing business online. Third, you need to be prepared to adopt new, dynamic partnering relationships as customers' needs present new challenges and priorities. Fourth, be prepared to participate in customer-led, self-organizing communities and to respond flexibly as customers' behaviors reshape the practices in your industry.

Master the Basics
In our last book, Customers.com, we introduced the mantra "make it easy for customers to do business with you." That phrase has become the rallying cry for businesses and organizations all over the world. Forward-thinking companies have been harnessing the Internet, the Web, and other customer-convenient technologies-like mobile phones and wireless hand-held electronic gadgets-to make it easier for customers to do business with them. These companies are the ones poised to thrive in the customer economy, not just because they've implemented customer self-service strategies but, more fundamentally, because their corporate strategies are now being driven by customers.
Companies that have already adopted the eight critical success factors outlined in Customers.com have an advantage over those that are just beginning their transition to a customer-centric business model. They're much further along on the customer technology learning curve. Their customers are more satisfied and more loyal, and they've continued to refine their ability to measure and enhance the things that matter to customers.


From the Audio edition.

Copyright 2001 by Patricia B. Seybold with Ronni T. Marshak and Jeffrey M. Lewis

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What People are saying about this

Chris McCann
As offline and online businesses blend, the ability to build deep customer relationships equates to long-term survival. Patricia Seybold explains why and how to 'play to profit.'
— (Chris McCann, president, 1-800-FLOWERS.com)
Jeet Singh
Understanding and managing customer relationships lie at the core of how companies are defining strategy, measuring profitability, and creating competitive advantage. Patricia Seybold details how to begin doing this in your company immediately.
— (Jeet Singh, CEO, Art Technology Group)
Geoffrey Moore
Wherever repeated transactions represent the core rhythm of a business, management must focus on the lifetime value of its customers and the company's programs for creating and sustaining customer loyalty. The Web simply makes this imperative even more urgent. The Customer Revolution makes great use of war stories and case examples to guide us all in seeing just how to address this critical issue.
— (Geoffrey Moore, author of Crossing the Chasm and Living on the Fault Line)
John R. Samuel
Patricia Seybold provides practical guidance on how to make customer loyalty the centerpiece of your company's strategy. She not only shares the logic, but also gives real-world examples of how to make it a reality.
— (John R. Samuel, Vice President e-Business, American Airlines)
C. Patrick Garner
Patricia Seybold details the steps you and I must follow to transform customer capital into shareowner value in her compelling, convincing new book.
— (C. Patrick Garner, CEO, The Motley Fool, Inc.)
James Daly
Think you're in charge of your company's future? Not so fast. Patricia Seybold proves that the wealth embedded in customer relationships is now far more important than all the capital contained in your firm's land, buildings, and bank accounts. Then she crafts a smart and solid plan for untangling the tricky puzzle of finding, attracting, and keeping the savviest buyers the world has ever seen.
— (James Daly, editor in chief, Business 2.0)

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Meet the Author

Patricia B. Seybold is the founder and CEO of the Boston-based Patricia Seybold Group, a worldwide business and technology strategic consulting and research firm. Her clients include many Fortune 500 companies.

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