The Flawed Business Model – how corporations worldwide lost sight of their Customers.

How 'Customer Wallet Focus' took over from Customer Focus.
By Niels Kjellerup Editor and Publisher, Ashgrove June 2nd 2004.
When the idea of outsourcing the Customer Contact first was proposed to me in 1997 by a senior executive of IBM Corepoint my reaction was typically nave and uninformed of the ways of large corporations “ Why would any Corporation remove such a critical component of their future sales and revenue to a 3rd party?”.

Since that time I have fought through the snowstorm of outsourcing and seen 100s nay 1000s of corporations entrust the Customer Interaction to outsourcers and I have learnt the mantra of Wall Street “Take out cost, no matter the consequences”. Still nave, but somewhat wiser, I have concluded that many corporations world wide have simply abandoned their traditional business models in favour of what I now believe is a serious flawed Model in an attempt to satisfy ‘The Cost cutting frenzy’, so applauded by Wall Street in the name of creating shareholder value.

Loosing Customer Focus

Any corporate executive anywhere will affirm that ‘Customer Interaction’ is a core competency of their corporation. In fact marketing and sales are seen as absolutely vital to the success of The Business Model; somewhere along this development path SERVICE was disengaged from the customer interaction model and seen as a cost completely disassociated from future sales. From that time on we see a new business model emerging: 

The Customer Wallet focused business model

This model sees the Core competencies in relation to the customer-wallet, ‘the ability to extract wallet content in sales and marketing situations’ and thus secure revenue for the business model. No matter how bad or indifferent the service delivery, this model presumes that as long as we keep focussed on the Customer Wallet the customer will continue to do business with us. Marketing is basically aimed at promising a better price and teaching the customer that loyalty & added value is a thing of the good old days before cost cutting made it impossible. CRM is implemented, not to improve service delivery, but in order to identify Customer Wallet content. Quality Monitoring becomes an exercise in compliance with Quality Standards not set to improve the customer experience, but to conform to some pesky Quality program.

‘Bugger the customer, we have got his wallet’- is a pretty fair summation of this business model. In Asia we’re seeing what I have dubbed:

The Chinese Business Model

It’s based on the idea that everyone buys on price and price alone. If the West insists on Customer Service as part of the Customer Interaction we’ll humour them, but in our heart we know that price and price alone drives our business model. Service is seen as a wasteful, costly exercise best kept to an irreducible minimum. Marketing is the activity of promising more than we can deliver in such a way, that when the customer finds out, it’s too late. Maybe worst of all is "RULES always win over satisfying the customer".

'Our policy is....' is the normal explanation for letting the customer down. Zero incentive to go the extra mile for the customer, rather play it safe with the boss. (This is my own very rude generalisation of 10 years experience working in Asia and I apologise to those corporations, who have actually adopted an enlightened business model which highlights Customer Service delivery as a vital part of future sales).

The Customer Walk-out Syndrome

The backlash has arrived and customers are deserting these corporations in droves. Today we’re seeing the ‘Customer Walk out syndrome’ taking its toll. “I control my wallet and who gets access” is the customer response. Maybe that’s why GE Capital has rebuilt its customer service centres in Melbourne rather than handling world wide service delivery in Delhi. Dell Computer re-establishing critical Call Centres in Texas, back from India.

'The only real scarcity in the 21st Century is ‘Customers who are happy and will continue to buy from you. For every customer there are 10-20 companies eager to win their business, and the experience of doing business with you will determine where they choose to spend their money. The internet just makes it easier to locate your competition and their offers.

Let me end this article by quoting my personal corporate hero Jack Welsh:
“We, GE, only have two sources of Competitive Advantage:

1. The ability to learn more about our customers faster than the competition &
2. The ability to turn that learning into action faster than the competition “
Copyright Niels Kjellerup 2004.

Last update: 30.03.2016