By not singling out any group as the primary customer, executives can sidestep difficult choices that might turn out badly-a temptation that’s particularly strong in new, rapidly evolving markets.
Unsurprisingly, perhaps, many executives are reluctant to define their customers as narrowly as Merck has. The business is even configured like a research university-a simple functional structure in which a powerful, centralized R&D unit receives the bulk of organizational resources.Īmazon devotes its resources to pleasing consumers, even if that means sellers or content providers sometimes feel shortchanged. Accordingly, its business model relies on encouraging its own world-class researchers to act like university scientists by conducting basic research, publishing papers, and presenting results at conferences, all with the intent of discovering groundbreaking compounds that can then be commercialized by Merck’s marketing and sales group. Instead, Merck has chosen research scientists in labs and universities around the world as its primary customer. Pharma giant Merck’s most important customers are not the patients who use its drugs or the physicians who prescribe them. Other definitions don’t even require that a customer supply revenue. Some companies go as far as to label internal units as customers: Manufacturing is a customer of R&D, for instance, and both are customers of HR. That includes any number of actors in a company’s value chain: consumers, wholesalers, retailers, purchasing departments, and so forth. A working definition might be that your customers are the people or entities that buy your products and services and supply your revenue. But the term “customer” is among the most elastic in management theory. Finally, make sure you have good systems in place to identify and respond to shifts in those needs.Īll companies claim that their strategies are customer driven. Adopt the business model that best allows you to satisfy your primary customer’s needs and preferences.Ĥ. Understand what that primary customer values most by tracking purchases and preferences and studying behavior.ģ. Identify the customer group that best fits your company’s culture and traditions, most closely matches your existing capabilities, and offers the greatest direct and indirect profit potential.Ģ. The SolutionĪdopt a customer-driven strategy that involves four steps:ġ. But they risk being pushed aside sooner or later by competitors who clearly identify a primary customer and create a business model designed to satisfy that customer ahead of all others. When companies shy away from choosing a primary customer, they may survive for a while. Many companies, therefore, try to hedge their bets and treat all their stakeholders as customers. In fact, for some companies, the most important customers actually supply little or no revenue. It isn’t always obvious who your most important customer is. Finally, build an interactive control process to monitor shifts in the assumptions that underlie your choices and prepare an action plan to respond.Third, allocate resources accordingly, using one or more of the five business-model configurations: low price (Walmart), local value creation (Nestlé), global standard of excellence (Microsoft), dedicated service relationship (IBM), or expert knowledge (Merck).Data analytics, ethnographic research, and other methods can reveal needs and preferences that customers themselves may not be aware of.
Second, create processes to learn what your primary customer values are.Amazon serves four very different types of customer (consumers, sellers, enterprises, and content providers), but it devotes the lion’s share of its resources to pleasing consumers, even if that means sellers or content providers sometimes feel shortchanged.
This choice determines what resources and capabilities you invest in and how you organize your business. First, identify the best primary customer for your business.In this article, Robert Simons of the Harvard Business School presents a framework that can help companies develop strategies that are truly customer-centric. But when “customer” means any number of entities in a company’s value chain-consumers, suppliers, retailers, even internal units like R&D-managers tend to lose focus, and their firms become vulnerable to competitors who have clearly defined who they serve and how.
All companies claim that their strategies are customer driven.
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