Moving customers from “cost center” to “asset”

Cost Center

Within my five-competency customer experience framework, I often call No. 1 — honor and manage customers as assets — the “clincher competency.” This is where you begin to move customers away from being perceived as a cost center and towards being perceived as assets. Let me explain a little bit about what I mean.

If I go work with a company on their customer experience delivery, oftentimes I ask executives if they know the volume and value of their new customers. Do they compare this data monthly? Weekly? Annually? Can they contrast it with the value of lost customers?

This is what I commonly hear back at first: “It’s in our data.”

That’s not a good enough answer, because that means (to me): “It’s there, but it’s buried.”

If you want customer experience to be just another silo or a cost center, do it the way you’ve always done it.

If you want customer experience to drive growth in your company, keep reading.

The cost center issue: Background

Here’s an interesting article from The Atlantic a few months back about the “obsession” (their word) that many American males have with money and work. Here’s a money quote:

Rich American men, by comparison, are the workaholics of the world. They put in significantly longer hours than both fully employed middle-class Americans and rich men in other countries. Between 1985 and 2010, the weekly leisure time of college-educated men fell by 2.5 hours, more than any other demographic. “Building wealth to them is a creative process, and the closest thing they have to fun,” the economist Robert Frank wrote.

Now, you can take some of this with a grain of salt — and that’s fine. But here’s my point. If you spend years building a company, and you get it to some astronomical valuation, that company is now part of your story. It’s your narrative. In a way, it’s somewhat your legacy, and that’s what this quote is about.

Too many leaders, though, don’t take it personally when customers depart a business they spent decades building. You need to take it personally. You’ll never move customers from “cost center” to “assets” unless you care.

Cost center to assets: How do you care?

You need to shift to a simple understanding and measurement of success for customer-driven growth. This keeps it easy and gets everyone on the same page. Here’s the bullet point form of what you need to do:

  • You’re moving from “what customers say they might do” (survey results) to “what customers actually did” (metrics)
  • At each meeting, report the number of lapsed or lost customers by volume and value
  • Also report how many increased their purchases
  • Please also report out how many decreased their level of engagement
  • Sort all this by segment
  • Point to behavioral patterns that show increase/weakening of customer relationships
  • Present data on movement of customers across and within value segments
  • Highlight 1-2 referrals from existing customers

Do this at every meeting. It needs to become ingrained. You’re moving towards one-company leadership where the focus of all the execs isn’t their silo, but the customer. How is the customer base going to make you money? If you’re messing up your customer experience, how much money are you leaving on the table? People need to understand this. It will motivate them.

Your customers cannot — absolutely cannot — be a cost center. They must be a primary asset of your business. The above is how you begin moving them there.

The problem of retention rates

Some companies love — love — to report out retention rates. This metric has its place, sure, but it often provides a false positive. Retention rates don’t directly, and glaringly, show the number of people who left. You need to know exactly how many people stopped doing business with you, and you need to have some form of a handle on why. If you bring in 22K customers in a quarter, awesome. But if you lost 37K in the same quarter, that’s a less-than-rosy picture. A retention rate might make an executive feel good in the moment, but that same executive now doesn’t have the proper intel to run his/her business. That’s a problem.

The sad fact is this. We live in the era of customer experience and yet, many companies operate according to old business models whereby customers are essentially wallets with fingers. Note this article from Wharton:

But most established firms remain hesitant when it comes to this type of customer equality and mutuality. Our research on the business models of the S&P 500 Index companies (based on data from 1972 to 2013) indicates that at present more than 80% of companies employ older business models where customers are valued only for their dollars and not for their assets, insights and contributions. If your organization can break ranks and adopt this new way of thinking and acting, you will see that the more you share with your customers and the more you understand them, the more they will love you.

Your customers need to be assets. They cannot be a cost center.

Anything else you’d add here?


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