Customer-centricity still dominates the consumer and retail agenda.
“The purpose of business is to create and keep a customer,” observed management guru Peter Drucker in the 1950s. For manufacturers and retailers serving the consumer, that mission remains, it’s just that creating and keeping customers has become significantly more difficult in the past 60 years – and particularly in the past five. Companies have not been complacent, pumping billions of dollars into customer service programs—but is the investment really paying off?
The American Customer Satisfaction Index (ACSI) suggests that these investments have, at best, incrementally improved the customer’s experience. In the third quarter of 1994, when the ACSI started, the overall figure across the whole US economy stood at 74.8. At the end of 2016, it had risen slightly to 76.8. For some consumer products – notably apparel, food manufacturing, personal care and cleaning products and soft drinks – satisfaction had actually declined marginally over that period. The ratings for breweries were the same at the end of 2016 as in 1994, while customers were slightly more satisfied with supermarkets and department stores.
To be fair, consumer goods and services’ satisfaction scores were not untypical. The industry that most dramatically improved its ratings was cellphones – up from 69.0 in 2004 to 79.0 in 2016. Yet even there, the improvement in satisfaction has leveled off, increasing by only three points in the past five years.
The ACSI is only one metric – although, in broad outline, the findings are mirrored by its UK equivalent – but does it show that the industry’s investments have not delivered the anticipated return? Or that customers are becoming much harder to satisfy? Probably a bit of both.
Many consumer industry executives say that customer expectations are increasing, becoming more complex, changing more quickly and are often harder to fathom even than they were a few years ago. Sensing the signals of change isn’t easy if you continue to see the market through the traditional lens. Consumer goods companies need to take a broader, more holistic view, that takes into account changing demographics, behaviors, expectations and values but also at start-ups and VC investments to deepen their understanding of the future of their business, their sector and their customers.
One of the difficulties is that the pace of change – even in terms of consumer preferences – varies enormously from sector to sector. Mike Coupe, CEO of Sainsbury’s, concedes that the supermarket sector has seen more than its fair share of disruption, but points out: “Customers are shopping around more because there are more shops, more choice and some strong online players. At the other end of the spectrum, the top ten products we sell today are the same as they were 10 years ago. Chicken tikka masala is still the best-selling ready meal in the UK and it was 10 years ago. Chicken breast fillets are still the top-selling skewer – as they were 10 years ago. What people buy is not changing anything like as fast as where and how they’re buying it.”
Yet in an uncertain marketplace, even iconic brands and retailers are vulnerable – a fact their leaders seem to recognize. The 2017 Top of Mind survey shows that, once again, customer trust and loyalty is a top priority for 3 percent of companies over the next two years. Nearly three out of four executives identified this area as very to critically important to the success of their business. The other top-ranking priorities were product and pricing strategies (29 percent) and customer experience (26 percent). In comparison, such previously hot issues as talent management, geographic expansion and social and environmental responsibility were a priority for less than 25 percent of respondents.
More on customer centricity on page 8 of the 2017 Top of Mind Survey >>
We spoke with consumer and retail executives to find out how they are responding to the opportunities and challenges of customer centricity. Read their interviews here: