This is the fourth in a series on stakeholders’ value creation.
The case of customers as stakeholders appears self-evident. Simply, a company cannot exist without customers. The purpose of every business centers on creating customer value. Forgetting that customers are the ultimate decision makers of what they will buy can be fatal. The premise that customers are stakeholders is more complex however. Where do a company’s interests intersect with those of its customers? Corporate boards and management are focused on financial performance, stock prices, and maintaining sustainable and profitable growth objectives. Customers want products and services to meet their standards, expectations and needs at a price they are willing to pay. In addition, an increasing number of their buying decisions are influenced by whether a company’s values align with their own (e.g., fair trade coffee, the green revolution etc.). The challenge is to ensure that the needs and wants of the company and of its customers are met simultaneously.
Forward-looking companies, Such as Apple and Southwest Airlines, devise strategies to satisfy and to reconcile the needs, interests and behaviours of their customers and of their shareholders. Trust is the cornerstone. When customers trust a company, they implicitly give it permission to influence them. Customers want to know that the companies they are doing business with are honest and dependable. Companies built trust by interacting with customers with transparency, integrity and respect. The prevalence of social and mobile technologies has changed the traditional ties that build trust between companies and their customers. These technologies are an accelerant and an amplifier of this process.
Present-day consumers have more power than ever before. They are better informed than they were only a few years ago. For many, trust means respect of privacy. “Seventy-two percent of Americans are reluctant to share information with businesses because they just want to maintain [their] privacy” (J. Gin, “A New Paradigm for Building Customer Trust”, Entrepreneur, June 27, 2016). This reluctance is intensified when global companies, such as Amazon, Google and Facebook, have little or no direct interaction with customers. It should be noted that in-store customers also value privacy. (See C. Esmark, “Your In-store Customers Want More Privacy”, HBR, Dec. 28, 2016.) Successful companies do not manipulate their customers. They ask only for personal information that is necessary to complete the transaction, forgoing near-term marketing opportunities offered by collecting additional data. Respecting privacy is an important branding differentiator for companies competing for the business of often leery customers. (See J. Hinz, “The Power of Customer Trust in Brand Marketing”, marketingland.com, October 29, 2015.)
The most successful brands, such as Starbucks and Disney, ensure that their clients are satisfied at every point of interaction with the company. They create environments that customers value. They eliminate practices and people that detract from the optimal customer experience. They empower their employees, and encourage creativity and innovation in dealing with customer wants and concerns. (See my December 5, 2016, post: “The Case for Employees as Stakeholders”.) One well-known retailer had for many years this simple rule for its employees:
Rule #1: Use good judgment in all situations. There will be no additional rules.
These businesses recognize that acquiring a new customer costs up to seven times more than retaining an existing one. (See “10 Reasons Why Customer Satisfaction Is Still a Crucial Business Metric”, July 16, 2016, by Infinit Contact.) Simply put, excellent customer service leads to customer loyalty, which in turn leads to sustainable long-term success.
The most successful companies treat customers as valued stakeholders. They develop and implement strategies that accommodate and leverage synergistically the interests of all of their stakeholders.