1. No. 111, August 2004
Simply Better:
Winning and Keeping
Customers by Delivering
What Matters Most
Professor The Customer is Dead – adopted 3. He acknowledges the folly of ‘big
Seán Meehan Long Live the Customer ideas’ such as the inkblot test, planning and
MBA Program control for profits, conglomeration, hostile
Director, In 1954, in the seminal work The Practice of takeovers, quality circles, T-groups, and the
The Martin Hilti Management, Peter Drucker provided us net bubble. The underlying message lies in
Professor of Marketing with a vision of what it really means to be his portrait of managers, the adopters of
and Change customer orientated1. He encouraged fads, as unthinking and risk averse. Harsh?
Management managers to move away from a specialized Perhaps not. It may well be that the reason
functional notion of marketing and redefine for such, in some cases reckless, adoption of
it as an overall business philosophy. He fads is that fundamentally high-talent
proposed that marketing is best thought of executives quickly get the hang of whatever
as the whole enterprise seen from the assignment they are given and have a need
customer’s point of view. In the 50 years to be more in the driving seat. They step
since then, executives, consultants and forward to champion an alliance, launch a
scholars alike have developed training and product or service, or enter a new market
change programs, frameworks and theories, or segment.This is all good stuff and is to be
all designed to move organizations closer to encouraged, provided job #1 has been
the customer. The outcome for customers, taken care of: delivering your value
though, is most of the time far from positive. proposition to the complete satisfaction
The American Customer Satisfaction Index 2 of your existing customers. There is room
is the world’s most comprehensive indicator for tremendous improvement on this
in this area. It not only suggests that dimension. And what could be more
no meaningful improvements in overall satisfying than the pride derived from a job
customer satisfaction have been achieved well done in the eyes of your customers?
during the past 10 years, but that, at best,
about one customer in four is insufficiently The Right Kind
satisfied with suppliers for them to be of Differentiation
assured of their future business. Frankly,
investors should be outraged. There is One of the first steps on the road to
enough evidence to indicate that customer recovery must be a reassessment of your
1 The Practice of Management,
satisfaction is a key driver of shareholder value proposition. Customers rarely buy a
Peter Drucker 1954
value. Customers are outraged. How many brand because it offers unique features or
times a month are you plainly disappointed benefits. They buy the best overall
2 For more details of the
with the performance of a supplier, a brand, combination of category benefits (those
composition, method and data
summary since the inception of
a service experience? In spite of the benefits most customers of all players in the
the index see www.acsi.org exaltations of some executives, the market want most of the time)… and if
customer is not king – not even close. there are none, then the decision is based
3 Geoffrey Colvin, “A Concise History
on price, or the first brand customers see,
of Management Hooey”, Fortune So, what is wrong? As Geoff Colvin, writing or the first that springs to mind. What the
June 28, 2004. p.58-65. in Fortune, noted, managers are fad surfers, customer buys is a brand; what he or she
because it is safe as long as the fad is heavily needs is category benefits. Take the

2. Simply Better:Winning and Keeping Customers
by Delivering What Matters Most
“ Differentiation
matters when and only
example of gasoline. If suddenly it was not
available in the USA, the nation would grind
Orange quickly established a prominent
position in the market by differentiating
when it is relevant... to a halt. But if BP or Exxon gasoline generic category benefits.
customers want disappeared overnight, no great problem,
simply better, even with such strong brands. Most Orange discovered that mobile phone
not simply different.
” management discussions that I am privy to
focus very quickly on the unique
customers felt negatively about quite a
number of aspects of their service
differentiator, probably a close cousin of providers, including cost and poor network
the USP. Under the mantle of sustainable reliability. Orange differentiated with a
competitive advantage, managers are promise to provide reliable service, but
obsessed with having a feature or attribute also per-second billing, a simpler rate plan,
that no one else has. But business success caller ID, a money back guarantee if the
does not depend on offering something service failed and itemized billing, free of
unique, nor do customers make purchases charge. Think about it, these ideas are
based solely on a unique product neither hugely inspirational nor technically
characteristic. Differentiation matters challenging. All could, and in fact would, be
when and only when it is relevant. copied within months. But by then Orange
Customers buy the brand they expect will had established itself as a company that
meet their basic needs from the product gave a damn about customers.
category better than the competition.
Customers want simply better, not simply It is worth noting that Orange, despite being
different. the last entrant, did not try to position itself
for any particular type of customer but for
Consider the case of mobile all customers because the category benefits
telecommunications service provider were seen as universally relevant. Cemex,
Orange. With the advent of digital supplier of ready mixed cement, does not
telecommunications in the United try to differentiate through segmentation;
Kingdom, the government awarded two customers, whoever they are, want most of
licences: one to Orange, the other to all – the right kind of cement, at the right
One2One. They would join (analog) time, in the right place.That is what Cemex
incumbents Vodafone and Cellnet. Both delivers.The basics. Like all marketing ideas,
Orange and One2One had large, well- segmentation has its place in the strategic
capitalized public companies funding their repertoire, but only if it is relevant.
launch activities. Both had the same
technological capabilities. Their licences Identifying the Generic
were only for the UK. They were Category Benefits
operating under the supervision of a
dedicated government regulator. As level If business fortunes lie in delivering generic
a playing field as one is ever likely to see. category benefits better than the
Both companies were later sold within six competition, then, as business managers, can
months of one another, around 10 years we identify the right benefits demanded by
after being created. In management customers? First and foremost we must
research it is highly unusual to have such spend a lot of time directly with customers.
conditions – fixed start, fixed finish and a Apart from the obvious benefits of seeing
fairly level playing field in between. This firsthand the realities of your customers’ life
case is worth evaluating because of the and how your product or service fits in to it,
huge difference in outcome. One2One and giving all employees a morale booster,
was sold for £6.9bn, while Orange was this activity when done properly has some
sold for £20bn. A closer look at the less obvious benefits.
choices made by the respective
management teams is revealing. In simple Consider the example of Hilti, a world
terms, One2One adopted the standard leader in developing, manufacturing and
practices of the incumbents, while Orange marketing high quality power tools and
asked what mobile phone customers fastening systems for the construction and
want but are not getting most of the time? building maintenance markets. It serves only
2

3. professionals and sells directly through its these CEOs spent their customer time.The
field force of technical sales representatives poor performers spent it socializing at
(TSRs). Broadly speaking, this channel cultural or sporting events - not a good
structure is most productive when focused context for getting meaningful feedback.The
on medium and larger enterprises. It is high performers preferred to get down to
simply too hard and inefficient to locate and business and find out whether their
serve the vast number of small businesses. companies were living up to the
When a proposal arose in France whereby expectations. They were also highly curious
Hilti, with precisely smaller contractors in about how they could improve their
mind, might sell directly but using a ‘shop in companies’ service offerings. Executives
shop’ model, it was met with initial who indicate clearly just how open they are
skepticism. Critical in eventually deciding to for negative feedback and how keen they
exploit the opportunity was the are to improve bad situations, are the ones
recollection of a Hilti executive board who benefit most.
member from a visit he had made to
France, of how hard it was for the TSRs to To better understand which are the generic
reach these customers. Hilti went forward category benefits executives also must, by
on a pilot basis. definition, look at the competition.
Understand whether they have found an
Although this initiative amounted to a very opportunity before they fully exploit it.
small activity, even within Hilti France, the Activating the antennae of every employee
very thought process of considering the is also a sound policy - successful companies
proposal and then evaluating the pilot do this and ensure that they tune into new
project led to Hilti’s executive board being product launches, territorial invasions etc.,
better able to evaluate a subsequent so that they can take evasive action before
proposal to sell Hilti products from the huge they are left for dust.
US retailer Home Depot. Ordinarily Hilti
would have rejected this out of hand, but in Focusing on your company’s and your
the light of the French experience the competitors’ failings, is another route for
executive board and the US management getting the category benefits right. Assess
team entered the negotiations well how the whole category could improve.
prepared, struck a good deal, and today Hilti Cemex, the Mexican cement giant grew
can be found in some 100 Home Depot from a regional player to world leader by
outlets. It is an activity that would never have concentrating on basic category needs, not
happened had an executive board member on nice-to-have extras. Cemex looked at
not spent time directly with customers and
observed first hand what they really care
where other ready-mix suppliers were
failing. Since 1995, the company has “ Executives
who indicate clearly
about. In this case, for the smaller guaranteed its customers same-day delivery just how open
professional product availability is critical – it within 20 minutes of schedule in designated they are for negative
is a generic category benefit. geographic markets, regardless of weather feedback and how
conditions, including traffic-jammed Mexico keen they are
Although many companies have customer City. Cemex can make these deliveries by to improve bad situations,
contact programs, my studies reveal how using satellite and Web-based vehicle are the ones
and why some are hugely ineffective. In one
study I looked at the time allocation of
dispatch technology. Not only did this
system increase truck productivity by 35%, it
who benefit most.
”
CEOs of around 100 of the best wedded customers firmly to the brand.
performing companies in the sample -
measured by market share, sales and market Thinking “Inside the Box”
share growth, profitability and return on
www.imd.ch
assets. I compared this with the 100 worst Don’t misunderstand; this is not an anti-
performing companies. The results showed innovation story, quite the contrary.The key
the high fliers spent 18% of their time with is to avoid innovating just for the sake of it.
customers.The stragglers spent 15% of their Probably the most exciting form of
time interacting - hardly a significant customer focused innovation taps into
difference. What was different was the way unexpressed latent needs. Examples,
3

4. Simply Better:Winning and Keeping Customers
by Delivering What Matters Most
“
In putting
the customer center
although comparatively few, are well known:
Canon with its small photocopiers,
Re-connect with Customers
stage we urge Starbucks with its coffee houses and CNN There is often a wide gap between the intent
managers to reassess with news. History shows that the innovator and the experience. Companies have to re-
how well they is often not necessarily the one with the connect. One way to start the process may
really understand what greatest success. When competitors enter be, at the next informal outing with
customers want.
” the market, they can have the advantage of
learning from the innovator’s mistakes and, by
colleagues, to turn the discussion to disasters
they have experienced personally as
getting to grips with the category benefits, customers of other businesses – we all have
can beat the originator. Neither Pampers nor them. Now work through one or two of
Costco were innovators in their respective them in more detail – how on earth could
categories. they have happened? Could it happen at your
company? Of course it could – worse, it
Thus ‘thinking outside the box’ is something already has. But now, with the acceptance
to be wary of. It got CEO Dirk Jager and that unforeseen errors will happen, tackle
Procter & Gamble into a whole heap of what you can do to improve.As Michael Dell
trouble in the later 90’s.The box exists for a observes: “Everything can be done better.There
reason: understand it and perfect it before is nothing that cannot be improved.” 4
concerning yourself with too much wild
strategic thinking. Be realistic. We aren’t all In putting the customer center stage we urge
great creative and lateral thinkers.Think inside managers to reassess how well they really
the box first and ensure that the customer’s understand what customers want.
basic expectations are met.This is what Tesco Competitive advantage can only come from
did in coming from behind to become UK a solid foundation, knowing your customers
market leader in grocery shopping. It and how they choose, and delivering
continued, like Orange, to push the boundary consistently whatever it is that matters most
on delivering on the generic category to them.The rest should be seen for what it
benefits. From that solid platform, businesses is: a lottery. So start now, and never stop.
can build emotional value into their brands
and plan for more innovative product and Seán Meehan is the Martin Hilti Professor of
service development. Think of Tesco’s move Marketing and Change Management and IMD
into online shopping. It has become the MBA Program Director. This article is based on
world’s biggest online grocery service, leaving his book, co-authored with Professor Patrick
the erstwhile Webvan in its wake, by never Barwise of London Business School, entitled
forgetting that the customer’s needs are Simply Better:Winning and Keeping Customers
straightforward and if it takes its proposition by Delivering What Matters Most, published by
online it needs to achieve the same level of Harvard Business Press (www.simply-better.biz).
performance that it does in its main business.
IMD
The only place I can think of where out of the P. O. Box 915, CH-1001 Lausanne,
box thinking has genuine merit is in Switzerland
marketing communications. Basically the Tel.: +41 21 618 0342
proposition is a difficult challenge.Think of the Fax: +41 21 618 0715
generic message: we’ll do what we said we info@imd.ch
would, when we said we would, at the price http://www.imd.ch
we said we would and at the performance
level we led you to expect. Companies who Editor: Roger Whittle
understand the value of being better rather © IMD, August 2004. No part of this publication
than being different must make their may be reproduced without written authorization.
advertising stand out. For example, USA
retailer Target has managed to avoid total
4 Fiona Harvey, “Warrior wields new
domination by rival Walmart with the aid of
weapon from armoury,” Financial excellent and innovative marketing
Times, August 6, 2003. communications.
4