Customer Centricity and Customer-Dominant Logic – A Paradigm Shift or Buzzwords for One of the Oldest Ideas in Business Management?

Insights, thoughts, and some good advice from a well-known thought leader in marketing: Prof. Dr. Marcus Sch?gel

In a recent episode of my podcast ?#BeyondCXM – Customer Experience Management weitergedacht? I had the opportunity to talk to the well-known thought leader in marketing and former professor of mine, Prof. Dr. Marcus Sch?gel of the Universit?t St.Gallen (HSG) .

My questions to Marcus: ?What is going wrong, why have not all companies become customer-centric a long time ago? And why is it that even in companies that claim to be customer-centric, #customercentricity often comes to a halt in front of the customer service department’s door??

Furthermore, I wanted to know from Marcus to what extent a newer perspective on marketing and business such as the Customer-Dominant Logic, promoted by professors Kristina Heinonen and Tore Strandvik of the Hanken School of Economics, would ultimately result in a better #customerexperience.

Marcus teaches and conducts research at the University of St. Gallen on #customercentricity, #customerexperiencemanagement, and #channelmanagement. He is the initiator and author of the “St.Gallen Customer Experience Navigator”, a guidebook and masterclass concept for executives to define their customer experience efforts and lead their companies to valuable interactions. He acts also as an academic director for several in-house programs, e.g. for Bayer Crop Science, Franke, Phonak, Holcim, Henkel, and Wagner. Furthermore, according to his own statements on LinkedIn, he is "passionate about bringing companies to the good side of customer orientation” and has a podcast on marketing topics with two of his colleagues called ?Dirty Deeds Done Well?.???

While I also contributed to the content of our podcast episode to a minor extent, I want to solely reproduce Marcus’ statements here. It is his statements that make this episode so valuable for everyone in #customerexperiencemanagement, #strategicmanagement, or #marketing in general. And because of that, I thought it was worth translating them from German to English and thus making them accessible to a broader audience.

Here we go:

?Achieving customer centricity is not as easy as it sounds. People underestimate the challenges involved in understanding and serving the customer holistically - and creating value from it. Many managers also come from backgrounds that are still strongly influenced by the idea of shareholder value supremacy.?

?Customer Centricity is more than a project: It is at least a journey, if not a mindset or even a mission that a company should follow.?

?In the case of a complaint, it is often said: Call the customer service hotline and place your complaints there. This is silo thinking at its best. The reason is that we try to operationalize everything, putting everything into KPIs, and giving everyone a sub-task of what they should do. I think that's the wrong way to go about it. That's industrialization, and it shouldn't be like that.?

?But of course, it's difficult to deliver a great service on the hotline. Customers are emotionally charged. Many people still don't understand the "moment of truth”. The point where you have to be there for your customer at the moment when it means something to him. Then you can deliver on expectations and get the credit or destroy everything.?

?There are great technologies that will help - especially with intelligent automation and machine learning.?

?But you can also use technologies to shield yourself from customers. Technology needs to be well-embedded in what the business is trying to achieve.?

?The Service-Dominant Logic is an afterthought explanation for something we've seen in practice for decades before – the emergence of services as a key differentiator. Because service orientation existed in practice before theory even established that services are so important - especially in combination with the product. There were a few approaches that picked this up before Vargo & Lusch wrote it up. The problem at that time was not that the practice didn't know that this belonged together, but that the practice was looking for solutions. It was only because of this article appearing in the Journal of Marketing that we in theory began to take certain things for granted that had already been there in practice for a long time.?

?With a Customer Dominant Logic, I see it the other way around: The idea of holistic market orientation or customer-centric management goes back to Philip Kotler, Peter Drucker, Heinz Weinhold, and Heribert Meffert who saw this as an imperative to corporate success, earlier than most of the actual practice.?

?The idea of customer orientation or customer centricity is one of the oldest ideas in business management.?

?Peter Drucker described it back in 1954 in his book "The Practice of Management" - and nothing has really changed since then. It is much more important to deal with it in a problem-oriented way than to give it a new name. I agree here with my colleague Stefan Michel from IMD who says: "Companies are now slowly realizing that the customer is important - but it's just hard to reach." That is a much more important point than discussing if it becomes a dominant logic. Many companies have had that logic way before this theory.?

?Copying from successful companies is of little value. It's about finding our own solutions and our own understanding of what customer orientation is, and I think that's the right approach.?

?By customer centricity, we mean a dual value creation - for the customer and, in turn, for the company.?

?The debate about terms is of little help. It does not help to bring forward Customer Centricity. Though some companies have to rename some concepts to get things moving - that's perfectly fine. But at the end of the day, it's all about the final result: a satisfied customer. And against the backdrop of the competitive situation, the interchangeability of performance, increasing technologization and general customer expectations, that's more important than ever. We can hardly find a differentiating factor that helps us more than being relevant to the customer.??

?Customer Centricity and Customer Experience Management should be seen as two manifestations of the same debate.?

?Customer Centricity is a strategic imperative to successfully align the company with customer needs, to make money by creating a holistic orientation that satisfies the customer. This includes cultural factors, as well as structural factors, and the understanding that the “job to be done” is at the core of the company's orientation. For this, the business models of corporations must be very strongly oriented toward customer benefits and expectations. This is a very challenging debate that has to be run throughout the entire company and should be driven by top management. Customer Centricity cannot be subsumed into a single department.?

?Customer Experience Management on the other hand is "the rubber on the street". Customer Experience Management is what the result is, what the customers perceive at the end, and what the “Erfahrung” is that they have with the company. In this, all departments are linked that somehow, somewhere provide something for the customers – or not. Even the finance department has to contribute.?

?The customer-centricity debate is about whether my company can be more successful if I align myself strongly with the customers and their relevant needs and try to identify their jobs to be done and satisfy them better than anybody else.?

?Customer experience management, on the other hand, means supporting customer processes in such a way that the customer perceives what he expects from us in his everyday contacts to us, on the topics in which he is in interaction with us, and ideally, we even exceed this expectation. This is about the actual customer experience with the company.?

?You cannot put Customer Centricity into one department. Customer Experience Management, on the other hand, you can. It is a specialist department that helps the company to become better on the way to customer centricity and therefore works across the company on the process-related design of CX.?

Should you speak German, here are the links to the original recording:

Apple: https://apple.co/3pg6k7Y

Deezer: https://bit.ly/3uIdGCb

Podigee: https://bit.ly/2V1zLiL

Spotify: https://spoti.fi/3wRpmUw

YouTube: https://bit.ly/2Trj5B4