The customer is king! The customer is always right! But are they?
For many, these statements are as relevant now as they ever have been. At the end of the day, ‘the customer’ is where the business gets its money from. Nobody put it better than Sam Walton, who said:
“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
However over the very many decades since these statements came into the public consciousness, they have come under scrutiny. We might ask ourselves about those customers who ‘game’ offerings, or those dishonest consumers who might steal or attempt to sabotage our businesses. Surely these people are not ‘king’ and ‘always right’?
There are, of course, always exceptions to the rule. These statements were never intended to be as absolute as they sound. So, in order to fully contextualise the enormous dollops of truth within these statements, people have created variations that have attempted to qualify the truth. One such variation is:
“The customer is king… but only if the company is able to generate long-term profit from the relationship”
There is a lot of sense in this statement. At the end of the day, both the customer and the business need to be realising value from the relationship for it to work. There may be some instances when one side or the other doesn’t make profit or receive positive value from a single transaction, yet they remain loyal to the other in recognition of the longer-term benefit. And in loss-leadership scenarios, where a loss-making product or service may be required within a portfolio, it may be necessary to make a loss when serving certain customers in order to ensure that a complete service-offering is available to other profitable target customers.
However there seems something quite cold and calculating about this particular statement. Those people who tend to see things in terms of absolutes might shudder at the very thought of questioning the authority of customers over the enticement of profit, irrespective of how correct or relevant it may be. In a discussion in one particular online forum, I came across a guy who took the view that rather than ‘sacking’ unprofitable customers, the business should be finding ways to service every single customer profitably.
This is certainly a very worthy sentiment. Of course, if the business can quickly and easily find a way to keep the customer happy and make a profit, then it makes perfect sense. However the reality is that this might not always be possible. In some instances, the cost of finding a new delivery solution or proposition outweighs the benefit of retaining that (and other) relationship(s). It may also be the case that the knowledge and skills required to service the customer do not reflect the core competencies of the business.
Most businesses understand the importance of segmenting the market and only targeting those customers who they can make a profit from and who will benefit from the delivery against their core competencies. Such is the nature of business strategy.
So, with this in mind, the time has come for the next iteration of the statement:
“The customer is always right… but they might not be right for us!”.
Rather than encouraging us to ‘get rid’ of unprofitable customers, this statement simply tells us that there might simply be a misalignment between the two parties. In fact, what businesses should really be focusing on is how they should be helping those non-target customers find the right solution, even if it means pointing them in the direction of the competition.
Do businesses really want to help their competitors? Ideally not, however you never know when there might be good alignment between you and that customer in the future. Furthermore, you never know which of your other potential customers they might be speaking to!