Customer value

The cult of the customer keeps popping up to annoy me. Yesterday I posted about how being customer-centric doesn't mean spending all our time with the customer, about how it's important to spend most of our time inside the factory, delivering. Today I want to talk about "customer value" and how it isn't the Holy Grail of IT. We as organisations don't exist for our customers. We exist for the continuance of the organisation, Click to tweet We exist to maximise value for the organisation, whether it be commercial, public or non-profit. It's not anti-customer to realise they are not the be-all and end-all of our existence.

The goal of our activities should be to maximise value for our organisation. That value is defined by the owners and governors of the organisation not the customers.

The measurement of value is of course different for every organisation. Customer value is not one such metric. Stop foaming: let me explain.

It is good business for most organisations to provide good value for customers, and to attract and retain customers. That is a strategy. But it is a means to an end not an end in itself. The end is to maximise whatever we define as value for OUR organisation. And it is not the only possible strategy.

In a commercial organisation that value may be profit or future potential or asset value or stock value. It is always linked to the wealth of the owners in some way, not the wealth of the customers. The owners want a return on their money.

© Copyright Canstock Photo IncIt is not about maximising customer value. If it were, then we would pay the customers to take our products and use our services. Click to tweet. In every commercial organisation it is about offering the minimum value we can get away with while still attracting and retaining customers. Over-servicing the customer is very bad business.

We don't seek to increase customer satisfaction to infinity; we seek to hold it at some carefully calibrated level where they are just happy enough to join and to stay. If we hold any sort of monopoly or lock-in, that level is pretty low, as any telco or bank customer knows. Sometimes a company sets the satisfaction dial a bit higher than its competitors to differentiate itself. If so, it needs to set its prices higher too in order to cover the increased costs. Shitty support is not an act of evil or stupidity: it is a carefully considered decision in order to maximise profitability. Next time you are fuming on hold, you should honour their courage and intelligence in directing their money towards lower prices for you and stronger long-term viability for your relationship.

In a public organisation value is measured as optimal use of limited resources for maximum overall benefit to the community.

This always means delivering limited value to individual customers. Hospitals would be unable to make payroll if they maximised health-care for patients. (This is discussed under "public" because I live in New Zealand where hospitals really do exist for the benefit of the patients).

Cynically, in a democracy it is also about maximising the probability of re-election of the governors of the organisation. This results in over-servicing specifically targeted customers (rewarding the supporting constituency or influencing swinging voters) to the detriment of all others.

In a non-profit, the viability of the organisation is as important as the benefits it delivers to its customers. It needs to be in business next year as well, to continue providing value.

  • The Shoes Of the Fisherman is an idealistic fantasy: the Catholic Church could give away all its money to the poor tomorrow, but it would cease to be the Catholic Church. That is not why it exists: it exists to be a political force for religion, and for that it needs wealth and power.
  • Robin Hood used crime to distribute wealth to the poor: any modern-day non-profit that truly sought to maximise value to its customers should emulate that.
  • Charities are criticised for the money they spend on administration, but they must also look after the welfare of their staff, the management of their assets, the integrity of their operations, and the transparency of their funding. They often pursue broader political aims as well. All of those activities reduce the value to their customers.

None of this says that we shouldn't build a culture of caring about customers. None of this says we shouldn't well understand our customers; take their point of view; understand and deliver on their needs. None of this says we shouldn't optimise what we provide to best meet their needs within the constraints of what we have to work with. All of that is good business.

But it is not the PURPOSE or GOAL of business. We should be focused on maximum value for our enterprise. That will naturally lead us to the correct level of value for our customers which is in the best interests of our organisation as defined by our strategy regarding our customers. It is perfectly valid for that customer strategy to be "f**k 'em": ask Microsoft. Click to tweet

So customer value and customer satisfaction deserve important places on our dashboard of internal organisational performance. But there is a reason why they occupy only one of four quadrants of the Balanced Scorecard: because they aren't the be-all and end-all of organisational performance.

And they aren't the GOAL of the organisation. We farm customers, we milk customers, we manage customers. We don't give them everything they want and we certainly don't seek to maximise whatever we give them.

It is not anti-customer to be focused on the value to our organisation. It ensures we care about the customer to the correct level. It ensures we don't blow money. It ensures we will be around next year to continue to care for them.

Please can we put down this New Age, huggy-kissy, customer-is-king B.S. once and for all.

See also this post from 2009: Excellent customer service: weapon or burden?

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