Question

You are in a meeting with some of your company’s more junior managers. After the discussion about the special services and custom product and delivery expectations of some customers and “going the extra mile” for the customer one manager comments we need to do that because the customer is always right. You are in the business of providing products to home builders and are getting many requests for non-standard paint colors. You are also seeing many special requests for job site deliveries at difficult to reach locations and very narrow delivery time windows causing much extra wait time for your trucks and drivers.

1. What are the key concerns related to excessive focus on nonfinancial customer metrics such as customer loyalty and satisfaction?

Answer 1

While customer satisfaction and loyalty is the key to success of any business, there are some significant disadvantages which come along with excess focus on such non financial customer metrics such as :

1. Costly : In order to satisfy the customers, companies make customer-focused policies which can be costly to the business and does not make financial sense such as allowing customer to return the products for free for a long period of time after sale. While setting such policies, companies often tend to forget the bottom-line cost and long-term viability and focus too much on capturing the market share by satisfying the customer.

2. Time consuming : Companies often tend to focus too much on the after-sale services, more than what is required and end up spending a lot of time and cost on the same.

3. Lack of Innovation : Customer-focused companies tend to operate only on the basis of their current customer's needs and wants which has a very negative impact on the company's innovation and creativity. Such companies resist coming up with new ideas and fail to upgrade themselves with time & technology.

4. Customer needs are ever-changing : Customer have varied needs which change rapidly over period of time. It becomes very difficult for the company to keep up-to-date with customer needs as it requires significant resources to be put in and also the company will require new staff with the required expertise as well.

5. Customer don't always know what they want : It is good to be customer-focused but the company also needs to realize when it is also important for the business to be less customer-focused. Studies and history have shown that many famous products were first rejected by the customer groups which later became very successful and famous. Hence the company also needs to take this into account.