Welcome to the age of customer goodwill

I recently read an article claiming that customer centricity is dead in the water because companies haven’t managed to flip the switch from product centricity to customer centricity. It went...

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April 18, 2017
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The term ‘customer centricity’ is an ugly duckling

As a strong believer in extreme customer centricity, I vehemently disagree with that statement. Firstly, there are companies that have managed to put the customer center stage. Think of CitizenM, Zalando, Starbucks or AliBaba, for example. Or think of Netflix, which is constantly running A/B tests[1] to evolve along with its audience and provide the best experience possible. They have all been able to monetize customer centricity. Big time.

Secondly, just because something is hard, doesn’t mean we can afford to stop trying. It’s such a typically European approach: thinking of a strategy by boxing it neatly in between limits and risks. That’s so … dull and boring. We should never let our dreams be restrained by limitations and rules. Elon Musk or Astro Teller never thought in problems and feasible solutions. They dreamt, and then tried to make those aspirations a reality. That’s how we’ll be able to innovate for our ‘Day After Tomorrow’. Not by thinking “Hmm, this kick-ass service will be very hard to put into KPIs, so let’s not do it”.

Using customer centricity as a gauge

People who claim that there is no way to measure customer centricity are stuck in a rut, milling over the same old KPIs and outdated measuring tools. These old KPIs are business-facing: operational efficiency, ROI, you name it, and that is precisely the problem. We need to evolve to customer-facing KPIs, and we have a long way to go.

There have been some developments, like the NPS (Net Promotor Score). You’ve seen it around: “How likely are you to recommend this product or service to others?” It is a first step in the right direction but, at the same time, it’s inherently flawed. It is nothing more than a momentary snapshot, devoid of any context or actionable insights.

The very essence of the NPS, however, is very valuable: gauging the success of a company based on the customer’s opinion. We are now using that mechanism to develop methods of measurement based on customer goodwill.

Customer goodwill lets you measure the value of your customers

Customer goodwill largely determines the value of today’s organizations. Despite being labelled ‘an intangible asset’, it will have a much larger impact than the existing physical assets we see today. Customer goodwill can be gauged in three different, classic departments.

1. Sales and marketing

The value of your customer is no longer measured by how much they buy from you, but by how engaged they are. In fact, an engaged customer is a true evangelist and therefore a part of your sales and marketing department. Word of mouth is the cheapest yet most efficient growth tool of all, making your engaged customers a huge asset.

2. Infrastructure

Thanks to the sharing economy, your customers can become part of your infrastructure. AirBnB’s customers have hotel rooms. Instacart’s customers have grocery delivery vans. Uber’s customers have taxi cabs. Using the classical definition of value, these companies are worthless, as they have no infrastructure. Their customers are what make them valuable.

3. Data

Data’s the new oil. Customers are not just customers. They are units of data. There’s a clear shift in the valuation of companies. Infrastructure is on its way out while data is skyrocketing in value. Improving your customer knowledge will vastly improve your organization’s value.

We are clearly seeing this new paradigm taking over contemporary entrepreneurship. In the old world, business-facing KPIs and physical assets were used to measure value. In the new world, new values like customer goodwill play a huge part in determining a company’s worth.

The human-to-human relationship

To me, customer goodwill can be taken quite literally. How does a customer show his goodwill towards your company? Customers have never been closer to companies than they are today. It’s a human-to-human connection: a personal relationship, largely built on trust, being able to count on each other and forgiving each other for past transgressions.

Companies like Apple, for example, have tremendous amounts of customer goodwill. Let’s cycle back to the Net Promoter Score: if the average company were to implement something that completely disregards the customer, they would receive significantly lower scores, let’s say 2 out of 10. When a company with a lot of customer goodwill does the same, scores will drop by a marginal amount, to 7 for example. In that respect, customer goodwill is a lot more valuable than pricing or sales.

The million-dollar question right now is this: how do we make customer goodwill measurable and how do we take control of it? I think companies have a lot to learn from psychology and sociology. How do marriage counsellors work? How do religions function? How do small communities make it work? Once we learn how to distil customer goodwill into a measured paradigm, it will become commonplace as the main determinant of a company’s value.

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[1] The A/B test involves showing sets of 100,000 viewers six different images and seeing which one attracts the most people. 

Rik Vera
Rik Vera
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April 18, 2017
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