Every company says it's customer-focused. Every mission statement promises great customer service. All executives claim they want close customer relationships. Don Peppers knows how to put the rhetoric to the test. "Do you know who your customers are?" he asks. "If a regular customer came into your store, would you recognize him? Are you tracking your regular customers on a regular basis? Do you have membership cards for your retail customers and email addresses for your business customers?"
According to Peppers, great service happens only when you relate to your customers "one to one." To do that, you have to identify your customers, differentiate them, interact with them, and finally, customize your products or services to meet their needs. It's a process that Peppers spells out with coauthor Martha Rogers in two best-selling books, The One to One Future: Building Relationships One Customer at a Time (Currency/Doubleday, 1993) and Enterprise One to One: Tools for Competing in the Interactive Age (Currency/Doubleday, 1997). As an evangelist for this new approach to customer service, Peppers maintains a full speaking schedule and, through his consulting firm Marketing 1:1, advises such blue-chip clients as AT&T, PaineWebber, Hewlett-Packard, Fujitsu, and EDS.
When Fast Company asked Peppers how he would evaluate a company's customer service performance, he offered four simple questions: Do you treat different customers differently? Do you create a learning relationship with your customers? Do you keep your customers? Do you organize around customers?
To complement Peppers's answers to these questions, Fast Company interviewed key innovators at four operations with cutting-edge approaches to customer service: the Willow Creek Community Church, Hitachi Data Systems, General Electric Medical Systems, and PeopleSoft. These profiles offer tools for delivering great service that you can apply today. Your own customers will benefit from these tools — after you customize them, of course.
Do you treat different customers differently?
Some customers are simply worth more to you than others are. And different customers also need different things from you. The rule is, treat different customers differently.
You should differentiate customers first by their value to you and then by their needs. It's simple: you don't want to waste time differentiating low-value customers by their needs, because you don't want to create a high-cost relationship with a low-value customer. Once you know who your highest-value customers are, you can differentiate them according to what they need.
You can even differentiate customers who seem to need the same thing. Simply expand your relationship into needs that aren't so uniform. For instance, if you're a phone company, you might think that all customers need the same thing from you: a clear, immediate connection. And in a way that's true: you can't do much to customize a phone call. But you can customize the bundle of services that surround the phone call.
Take invoicing. If I'm a business customer of a phone company, every month I get an inch-thick pile of paper — the phone company's invoice. What if the company gave me the invoice on a disk or if I could download it from a Web site? My accounting department could allocate the costs a lot faster and a lot more efficiently. Then we would return the information to the phone company with our own notations. Next month the invoice comes from the phone company with the costs predistributed the way we want them. Each cycle, the billing process gets faster, easier, more accurate, more customized.
That's the fundamental principle of the customer service relationship: the more each customer teaches you about what she wants, the more you can make it or deliver it that way, and the more difficult it is for her to take her business elsewhere.
Do you create a learning relationship with your customers?
Here's the underlying idea: the customer teaches the provider how to give him the service he wants, and that installed base of knowledge makes the bond extremely tight. That's a learning relationship — a relationship that gets smarter with every interaction. It's the linchpin of customer loyalty.
To make that happen, you have to find the most cost-efficient and effective ways of interacting with your customers. That's how you learn what they want and how valuable they are to you. The people at Dell excel at this. When you order a computer from Dell, they start by asking you what you need the computer to do. Is it your first computer? Are you going to use it only at home, or is it for home and work? Will kids use it? Do you want to do presentations on it? Do you have a printer? Do you need a printer? Will you be doing graphics? Are you ever going to be on the Internet? Then they recommend a particular configuration based on your answers.
They don't start out by saying, Do you want 133 MHz or 200 MHz? They start by asking what you need to do. That's fundamentally an interactive process.
You can create this interaction any number of ways. The trick is to find the one approach that works best for you. The phone, for example, is very effective. The bandwidth is high, you can read voice inflection, and data capture is good because a customer service agent punches everything in. But the phone is also a very expensive tool.
The Web offers an increasingly effective way to interact. When you interact on the Web, the cost to the supplier is zero. Nothing. Compare that with the phone: Every time you call Federal Express and ask them to track your package, your call costs them $2 to $3. They lose money on that package. But when you go to their Web site and track the package yourself, they make money. The more people use the Web site, the more cost-efficient the business becomes.
Do you keep your customers?
You never want to turn a customer loose. If you're a home builder and I come to you to build my house, you know that I'm also going to need an architect, a realtor, a lawyer, an insurance agent. You can't deliver those services. But it would pay you to have alliances with other high-quality companies and professionals who could deliver those services. That way you continue to own the relationship.
You have to be on top of what the customer wants. Customers are diverse and dynamic — their tastes and needs change from day to day and even hour to hour.
The more you customize your product or service, the more marketing becomes part of customer service — and the more customer service becomes part of marketing. You erase the distinction between getting a customer, keeping a customer, and growing a customer.
If you want to do a good job of acquiring new customers, you can hire a marketing director or an ad agency. No problem. But if you want to do a better job of keeping your customers longer and growing them into bigger customers, there's nobody you can hire to do that. It has to permeate your organization. It has to become a way of doing business.
Do you organize around customers?
Most companies aren't organized for this new way of working and don't have anyone in charge of making it happen. But the firm of the future will be organized around individual customer relationships.
You may not be able to make that change overnight. But you can start by identifying your highest-value customers and putting somebody in charge of them. That's an incremental step, but it speaks to three issues: organization, time, and money. As long as no one is responsible, no one is going to have the money or find the time. But if you put someone in charge, you'll make more money, and suddenly you'll also find the time.
Some people ask, Do our customers really want this? That's really old thinking! The fact is, customers want different things. Some really want this kind of individualized service. Others don't. Some will always award contracts strictly according to bids: they don't want a relationship with you. Others will gladly off-load functions to you if you perform them competently — and will remain loyal to you forever.
You have to think of customers as individuals. Once you start to think that way, you realize that your business is your customer, not your product or service. A great customer relationship gives you long-term business. The simple truth is, any company that can't identify its customers individually is going to be history.
Don Peppers (firstname.lastname@example.org) started Marketing 1:1 in 1992, after a career in direct marketing, finance, and business development in industries ranging from oil to airlines.
A version of this article appeared in the October/November 1997 issue of Fast Company magazine.