Transaction Myopia

Over and over in our consulting practice we are struck by how difficult it is for companies and their managements to “get their heads around” the whole idea of customers. And surveys in a variety of industries demonstrate clearly that most companies are underperforming when it comes to managing their customer relationships. However, many of these surveys measure the shortcomings of companies' efforts, rather than probing for the reasons. In our experience, executives clearly know how to talk about the need for more customer orientation in their businesses. They enthusiastically use the right words and phrases, including “customer centricity,” “relationships,” “customer intimacy,” “segmentation,” and “customer management.” But these words, more often than not, simply don’t get translated into consistent and workable processes. Not long ago we met with a large financial services firm wrestling with how to put into place a significant and well-thought-out customer segmentation program. They had the data, they had great analytics, and they could parse both their business and consumer bases into thin slices, focused not just on demographics and outward characteristics, but also on how they tended to use the company’s services and products. This was very sophisticated analytics, to say the least, and the firm was looking to get some traction. The managers at this firm felt that they should be able to use this fantastic amount of customer insight to generate more sales, and their various product managers were clamoring for the data. Yet, they couldn’t make the darn thing work the way they thought it ought to. Transactions were increasing in volume, but this was offset by a perplexing increase in customer churn. The problem was that the product managers—who had done a terrific job for the past several years in building the firm’s business—looked at sales transactions as their primary metric of success. How many new loans did we make? How many new accounts did we open? Not, how many customers did we satisfy? The real eye-opener At a client's location the other day, we had an “ah ha!” moment when we realized that this client—just like the financial services firm we referenced—is suffering from a kind of blindness when it comes to visualizing its business in any way other than as a series of independent sales transactions with customers. We’re calling this “transaction myopia,” and we think it may be the biggest single affliction preventing most executive teams from fully embracing a truly customer-centric point of view for their companies. It’s far easier for almost any business manager to think in terms of transactions completed—whether you talk about products sold, or calls handled, or loyalty points awarded—than it is to think in terms of asset values improved (i.e., lifetime values increased because of strengthened relationships). And obviously, having better transactional data will help any firm do a better job in making customer-centric decisions. But even sophisticated statistical analysis will not necessarily change the mind-set of the executives involved. We often say that thinking in customer terms, rather than transaction terms, is like seeing a different dimension of your business. Rather than focusing on one type of transaction (or product) at a time, and trying to sell that transaction to as many customers as possible, the truly customer-oriented firm will focus on one customer at a time, and try to line up for that customer as many transactions as possible, over the life of that customer’s relationship with the firm. For most businesses, the product transaction is the hero. But for truly customer-centric businesses, the customer is the hero. So, rather than trying to find more customers for your products (which is the primary objective for product managers), a customer-centric approach involves trying to find more products for customers. And this means someone has to be in charge of the customer relationships, one customer at a time.