If there have ever been times when people doubted the buzz-phrase “the customer is king”, this is definitely not one of those moments. Suit-wearing professionals who have interfaced with customers for the purposes of soliciting for business like me will endorse this statement without a blink. If business were used to just preaching what they weren’t practicing and got away with it, then the present state of the business environment, I am well convinced, is driving changing attitude. And this is definitely not by choice.
A number of game-changing factors have catapulted customer relevance to the topmost part of corporate deliberations and strategy conception. Arguably, the scary part of the narrative is that customers are very much aware of the power they have been handed and are wielding it mercilessly.
WHY CUSTOMERS HAVE BECOME POWERFUL
Simply put, customers are leveraging the bloody marketplace reality of crowded rival firms and true substitutes, a situation considered inconceivable decades ago, to demand what they want. Customers no more waste time to browse through what service provider can deliver and at what price. A new need and request simply takes a phone call and service providers will arrange a meeting in no time to negotiate solutions and compromises. Time to businesses has never been crucial and service providers are well aware that failure to respond in time carries consequences with bottom-line implications.
Globally, new companies continue to spring-up daily and the rate is known to be faster in attractive industries and sectors according to Michael Porter. In the most likely of scenarios, any new business directly competes with same product or service providers already on the market or creates a compelling alternative to seize market share. The bid to win customers and relationships drives hard strategy routed in the desperation to offer better value than the competition. The telling implication is that, customers are on daily basis being bombarded with offers through advertisements and cold calls aimed at getting them to switch or let rival firms in on a share of the existing business. Service providers as a result and in seeking this out-turn subject themselves to painful research and market intelligence gathering effort to understand what the competition is offering so as to deliver better alternative offer to consumers.
Consumers have come to understand that the situation has by default shaped itself into a battle between businesses. And what is at stake is their wallet which all is seeking to control a bigger share. Consumers have thus become premium products with power that puts businesses at their mercy. This position of power keeps expanding even as growth eludes economies and businesses are forced to pursue already taken customers for a share of their business, irrespective of how small. The trending situation has developed into marketplace corporate battle that continues to increase the power of customers as kings.
HOW CUSTOMERS HAVE BECOME POWERFUL
The desperation to survive and deliver returns to investors means that market players continue to seek avenues to deliver better value in the quest to acquire and retain customers. The leverage that consumers have on businesses as a result of the shrinking pie means those consumers sit in a judgmental position to decide who is promising more and better value.
Incumbents are fortifying their customer holdings – The fear of customers switching to rivals continues to dominate CEO nightmares. These uncertainties drives strategy moves of businesses to ring-fence relationships and keep the competition at bay. And the only plausible way to hold the fort is total value creation via better service and pricing. Value from the standpoint of the customer is informing service-specific demands. With the liberty to venture onto the market in search of better value, customers are frequently making demands that enhances their business operations as well impact the bottom-line. These include improved service to meet emerging business needs as well as not just market-competitive pricing, but significantly lower pricing. The leverage for customers is gotten from the market reality that rivals are ready and happy to offer that price for same level of service. Whilst this drives plunge in margins for incumbents, service providers consider it the best alternative under the circumstance compared to losing the relationship to rivals.
New entrants are desperate for market share and survival – Even in a growing industry, new entrants will still target and pursue existing businesses for market share. Wrestling account from incumbents hinges on better value promises in the arena of service delivery and pricing. Once again the battle between businesses rages on: incumbents versus new entrants and among new entrants. The struggle to woe customers with better value in the same vein places customers in a strategically favourable position to direct their business to service providers who are able to meet their demands. Clearly, customers are taking advantage of the competitive situation and are leveraging the opportunity to enjoy their market-handed kingship and power. This satirically can be likened to the bride being showered with gift by many suitors all in the bid to woe her and win her affection.
EVEN STRONGER RELATIONSHIPS CAN CAPITULATE IN THE FACE OF BETTER VALUE OFFERING
Traditionally, incumbents have sought to and succeeded in banking on stronger relationships to retain customers. With the presence of more businesses seeking to capture market share, the offer of sometimes incredible value renders that retention strategy by incumbent service providers irrelevant. Undoubtedly, customers cherishes good relationships but not at the expense of better value. It is only true to state that new entrants are breaking the relationship bond between incumbents and customers with better offerings that delivers more value. Knowingly, customers are very much instrumental in pulling these value proposals which is an attestation of the power they hold to call the shots. Even where stronger relationships prevails, it is achieved with service providers having to swallow and give in to deep demands of customers as opposed to losing the relationship to rivals who are aggressively pursuing same customers.
The advantage being played here is simple, customers who even value current relationship with service providers still activates the power button to extract more value. And this is achieved by constantly scanning the market for rivals and new entrants who are willing to offer better service and deep discounts to win the customer. With this offer in hand, customers approach service providers with their demand and backs the argument with the fact that rivals are willing and ready to offer same if not better. This places customers in a position of strength to negotiate to secure what they want. In this regard, they represent the powerful force since the silent implication is that should service providers fail to meet the demand, they are ready to move the business to rivals. And they will.
WHY THIS NEW FOUND CUSTOMER POWER SEEM LASTING
Shrinking global growth and economic downturns in recent time means that businesses are struggling to survive let alone return decent return to investors. The situation has and continues to generate bloody competitive battle even as more new businesses venture onto markets to vie for same customers. It thus follows that declining GDP Per Capita with its devastating impact on spending means that customer wallet is shrinking and this reflects declining value of businesses’ share.
The situation only has one single important implication: as value of share of wallet decreases, service providers will seek to either secure more share or protect existing share and this calls for aggressive strategy which eventually plays into the hands of customers. Whilst it has been argued that even stronger relationship will be sacrificed for more and better value, the sensible value delivering strategy eventually comes down to better service at a deep discount to customers. As hurting as that may seem to service providers, it is the only plausible avenue to get customers to stay.
Perhaps this is the new normal. If service providers ever meant for the saying (“the customer is king”) to be fluffy and just make the customer feel important without the real intention to deliver on that mantra, then it has proven to be the worst nightmare. Customers are aware of the power they hold and are using it with little mercy on service providers.
The question is at what point does a service provider decides that enough is enough, and can service providers ever wrestle back the power in the realm of the new face of declining global growth and vanishing opportunities?.
Author: Ellah Makuba is a Banking Professional with Over 5 years banking experience with particular interest in strategy work. || firstname.lastname@example.org || 0277324258