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In his book, Customers Mean Business, James Unruh, former chairman and CEO of Unisys Corporation, said: "partnering with customers promotes a deeper understanding of customer concerns and of areas for improvement. Partnering relationships can create a seamless interface between an organization and its customers."
Those are profound words and this is a significant concept for any company endeavoring to create an optimal level of customer loyalty for itself. Companies create value in partnership with customers, and value is as likely to come from people and information as it is from products and services. If companies practice new ideas, such as 'creating interdependence' and 'building equity' with their customers, they are strategically differentiating themselves from competitors. They are also creating 'barriers to exit', making it more difficult for their customers to leave and begin a relationship with a new supplier.
The idea of customer partnership is not new. Japanese businesses have used similar techniques for decades in process design and redesign. With the increase in customer focus, partnering has taken on added dimension in recent years. Companies like Chrysler actively use customers to help in the design of new vehicles. Southwest Airlines includes customers on teams involved in staff hiring. Preston Trucking, headquartered on Maryland's eastern shore, has a Quality College, adapted from Japanese concepts, where customers, non-customers, and Preston staff have a forum to evaluate operating methods. Companies like Weyerhaeuser send staff to customers' sites to learn, first-hand, how their products are being used and where better support can be provided. They return from these visits with customer-sensitized insight which is applied to many areas of process improvement.
Some sales types may view partnering as just another word for bonding, or establishing closer relationships with customers. It's considerably more than that. In many customer-supplier relationships, the interactions can be adversarial, with one side winning or losing the bargaining war to get the best deal for themselves. Partnering requires rethinking this type of relationship, and focusing on mutual investment and the potential for mutual benefit, in other words creating 'win-win' situations.
Several years ago, the new vice president of AT&T's NCS group saw significant declines in their business. NCS is the division that services all of AT&T's computers and local area networks. This is not a captive service business, because the NCS customers have the right to go outside, self-maintain their equipment, or use NCS. NCS had been conducting customer satisfaction research, but the vice president discovered that almost one-third of the customers who reported being satisfied were potential defectors.
The vice president saw that he would have to go beyond understanding the customers' needs and hoping that that level of insight would help create loyalty to NCS. Out of this recognition came a unique approach to customers, where they were encouraged to accept part of the responsibility for creating value and benefit for themselves while NCS accepted the remainder of the responsibility, was created. Having created it, NCS then set about training its management and customer service staff to execute partnership arrangements with customers. This was a very different form of customer-supplier relationship for many of NCS' customers, and it helped to strategically differentiate NCS.
After the first six months of applying partnership agreements to its customer relationships, the division's revenues were up 20% and its profits were up 35%. Over the next six months, revenues increased to 26%, positive staff perception of dedication and customer focus increased to 85%, and new business soared by 600%.
Another excellent example of customer partnering by an American company is Intuit, Inc., of Mountain View, California, creator of Quicken software for personal financial management, QuickBooks for business financial management, and TurboTax for tax computation. Scott Cook, Intuit's founder, says:
"Unwavering customer focus, that is exactly what we do at Intuit. We have well over 5 million customer contacts per year, whether on customer support phone calls or through our web site. Our research programs, beta tests, and usability labs put is in touch with thousands more every year to get their input and make our products better."
Intuit has set up 'listening posts' around their company, wherever there is customer interaction - engineering, customer service, and technical support - to capture the voice of the customer. They use these contact points to learn about what customers want and then they apply the information to problem resolution and new product development. This may not seem innovative to some companies, but Intuit has raised partnering to a high art.
For Intuit, partnering doesn't stop with customers. It extends to employees and strategic allies, as well. Their corporate culture is highly entrepreneurial, enabling staff to be creative and spontaneous, and highly mobile. They feel it's important that senior managers be flexible and understand the entire business, so training and cross-functionalism are actively practiced. Scott Cook tells the story about suggestions for Quicken a prospective product manager made during the interview process. Two hours later, the prospect stopped back to visit the interviewer. He saw that his ideas were already being applied to a prototype on the computer screen. It's an example of how Intuit listens to, and actively involves, its employees.
Intuit maintains partnership relations with financial institutions around the world: American Express, Chase Manhattan, Citibank, J. P. Morgan, Banque Nationale du Canada, Wells Fargo, E*Trade, Charles Schwab, Fidelity, Paine Webber, and American Century, to name just a few. Intuit works with its business partners on a team basis, seeking solutions where its partners, customers, and Intuit all benefit. One example of this has been the Quicken Tax Freedom Project, which enables millions of lower income Americans to do online tax preparation and electronic filing with the Internal Revenue Service.
Another partnership development has been to connect banking partners with their customers, giving bank customers the ability to conduct their banking and pay bills online using Intuit products. At present, Intuit has over one million customers using their products online; and they work with 80% of the largest financial institutions in the United States, representing over 50% of our country's checking accounts.
Cultor, a corporation in Finland, has made excellent use of partnership concepts with its key customers. They believe in creating synergies in any area where it benefits their customers and themselves: problem-solving, planning, research and development, etc. The essential requirement of strategic partnership is that mutual benefit be created. One of their subsidiaries, Ewos, set up such a partnership with Stolt Sea Farm in Norway., one of the world's largest salmon farming companies.
Like NCS, Ewos signed a partnership agreement with Stolt. Close attention was given to areas of mutual interest, and special effort was made to see that the partnership did not conflict with other areas of business for either Stolt or Ewos. When the partnership began, both companies made it a priority to communicate the details of the arrangements throughout their organizations. They identified over 30 joint projects, covering cost reduction, higher quality, and better order and information flow. Substantial savings were realized by each company, adding to their profitability.
Such formal customer-supplier partnerships may be a bit unusual, but they mark the differences between the traditional approaches to customer retention, customer loyalty, and loyalty schemes and what we could call the new paradigm. If, using traditional approaches, the company wanted to create loyalty among its customers, it would listen closely to their needs, create products or services (or loyalty programs) to meet these needs, and then hope that the customer would be satisfied enough to keep purchasing. The new paradigm calls for the company to get the customer to work closer with them, on an ongoing basis, so that the company can create and offer products and services of optimum value. The challenges are to get the customer interested in doing this, and even accepting part of the responsibility for making this happen.
A company, in seeking to develop stronger partnership with its customers, should ask several questions:
- How do my customers perceive advantage, solution, and benefit - in other words, value - when selecting a supplier? What are the tangible and intangible elements of that value? These can include technical capability, customer service, prices, product/service variety, integrity and reputation, geographical location, delivery timeliness, product conformance and quality, and manyother factors. Also, what are my strengths and weaknesses regarding processes, staff, structure, strategy, culture, etc.?
- How do my customers do business with me? What are the dynamics of their supplier decision-making process? Do I understand how choices, such as share of dollar allocations, are made? What complaints, expressed and hidden, do my customers have about my company?
- What do I know about the competition - who they are, the benefits my customers perceive from them, their ability to partner with my customers more effectively than I can? How can I position my company in a non-copycat manner?
- What is unique and special about my company? What original positioning do I have, or can I create, that would make my best customers want to partner with me? What, if any, operational and relationship modifications do I have to make to achieve partnership?
Partnership is a beginning strategy, and perhaps a new strategic approach to customers for many companies. Like any effective loyalty program, it will work best if enacted for the long-term. As Jaggers, the lawyer said to Pip in Dickens' Great Expectations: "Take nothing on its looks; take everything on evidence. There's no better rule." Quick-fix, tactical, or me-too loyalty programs often end in shortfall and frustration. That's the overwhelming evidence. Those companies interested in creating value by partnering with their customers would do well to heed that advice and avoid such loyalty techniques. There is no better rule.