Customer Proximity – are you customer proximate?
One of the principal characteristics that sets insurgents apart from incumbents, is the close proximity to customers (and more broadly the market) that insurgents develop. Customer Proximity can be described as the mean distance from the firm to the customer (i.e., the market place). As a firm matures and graduates into incumbency the Customer Proximity tends to diminish. Incumbent firms, over time, look ever more inwards, focusing more and more of their attention on their own internal functional efficiency. In part, this happens because the scale and scope, and therefore the complexity, of incumbents tends to increase; but this is a choice, not an inevitable consequence of incumbency. Incumbents tend to look at their customers from inside-out. They create products and services that, for the most part, extrapolate from their own internal assumptions about what customers want and need, based largely on existing or past relationships with customers. Organisationally, incumbents tend to interface with customers through only a small number of functions and roles (e.g., sales, service, marketing). The incumbent usually builds a fortress around the border of the company, whereby the customer is outside its boundaries. The customer comes and knocks on the door (i.e., to buy a product) and registers his or her satisfaction at the end of the transaction and, if you are lucky, promotes your product or service to another customer.
Unlike Incumbents, insurgents optimise for Customer Proximity, seeking to better understand the needs of their customers, discover unmet needs and bring customers into the value creation process itself. Insurgents look for different ways to engage customers and create alternative value propositions to become a significant threat to their incumbent competitors. While the incumbents work hard to improve existing touch points – refining and perfecting their customer experience, for example, at the point of sale- insurgents seek to identify and co-create new touch points with customers and forge organisational connections to these touch points, such that the boundary between the company and the customer becomes harder to discern. Go Get, an Australian car sharing company (similar to US-based Zipcar), exemplified this in their early years by involving customers in most of the company’s major decisions. Need new office space? – find customers that can design and build offices and use their services. Need to decide what fleet options to pursue? – get customers to select and decide and then make it happen.
Customer Proximity breeds engagement, not just between the firm and the customer, but also between customers. A customer proximate company will create opportunities for customers to engage not just with the firm, at the point of sale, but also with each other. Nike, one of the leading athletic shoe companies, does this particularly well. In cities all over the world, often on Monday evenings, legions of Nike+ Running Club members can be seen running through the city wearing Nike t-shirts and (mostly) running with Nike shoes. This is Customer Proximity. Customer proximate organisations extend the fortress out beyond the boundaries of the firm to include the customer. These firms become customer advocates and provide multiple platforms for customers to engage with them, each other, and sometimes even the competition. Zappos, a famously customer proximate organisation often helps its customers to purchase competitor’s products if unavailable or out of stock at Zappos. This is customer proximity.
How do you know if you are a Customer Proximate Organisation (CPO)?
- Your fortress begins, not ends, at the boundary of the company and the customer
- Your customers are part of the value creation process, not outside it
- You have multiple touch points with your customers at points relevant to their experience, well beyond your products and services
- The majority of roles in your organisation have direct customer contact (i.e., Customer Proximity = fn(#roles with direct customer contact/total roles)
- You co-create new experiences with (not for) your customers, sometimes independent of the products
- Your customers are highly engaged and advocates of your business (i.e., you have a very high Net Promoter Score)
It is, of course, possible for incumbent organisations to become Customer Proximate, but Customer Proximity is one of the hallmarks of most Insurgent firms (perhaps with the notable exception of Ryanair). Over the coming months, we will share more on this topic and seek to begin a dialogue about customer proximity with our own stakeholders. This will evolve into a new set of metrics and methods that will help organisations move beyond NPS and customer satisfaction, the traditional “inside the fortress” measures of customer engagement.
To learn more about Customer Proximity, please contact us and we will be happy to share our perspectives with you.