Customer Intimacy
Providing Lifetime Value to Your Customers
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Continuously tailor your goods or services to meet the needs of individual customers.
Customer service is a priority for most organizations. And the likelihood is that most of them can point to data and graphs that demonstrate just how high their customer satisfaction levels are.
But can those same organizations really say that they have such a trusting, personal relationship with their customers that it gives them a real competitive advantage? They might offer excellent customer service, just like many others, but do they go that "extra mile" and offer "customer intimacy"?
In this article, we look at what customer intimacy means, how it can benefit your organization, how to implement it, and the challenges involved in doing so.
What Is Customer Intimacy?
Customer intimacy is one of three core elements of The Values Discipline Model, which was developed in the early 1990s by strategy experts Michael Treacy and Fred Wiersema. [1] They further expanded on their theory in their book, 'The Discipline of Market Leaders.' [2]
The three elements of the Values Discipline Model are:
- Operational Excellence: providing good products at the lowest total cost.
- Product Leadership: developing new and better products through differentiation and innovation.
- Customer Intimacy: continually customizing products and services to meet the customer's needs.
Terms reprinted by permission of Harvard Business Review. From “Customer Intimacy and Other Value Disciplines” by Michael Treacy and Fred Wiersema.Copyright © 1993 by the Harvard Business School Publishing Corporation; all rights reserved.
Customer intimacy can be thought of as an advanced form of customer-centric business. It involves learning as much as possible about your customers, either as individuals or as very small segments of your market, and meeting their specific needs.
By learning more than anyone else about your customers, you can tailor-make a product for them, or cherry-pick a bundle of products and services, that meets and preferably exceeds their expectations.
Customer Intimacy Example
Imagine that you manage an outlet of a large retail chain, where you're regularly tasked by head office to implement centrally-designed sales promotions. For example, every store recently ran the same campaign, involving fun recipes for customers to try cooking at home.
It was a success in some regions, but it flopped in other, mainly busy, urban areas. The feedback was that, in those areas, customers favor pre-packaged meals that are quick and easy to prepare, but still healthy and nutritious.
Recognizing this, head office responded by giving its marketing team full access to the data collected at every point of contact between the customer and the store. It then allowed those team members to work with individual store managers to customize promotions, so that they can provide goods or services that are most relevant to local customers.
The company also introduced inventory management systems that use this data to automatically reroute or reorder the right products to the right places at the right time. The store's cash registers were then programmed to print out promotional vouchers along with receipts, offering discounts that are relevant to individual customer's buying habits. It even rolled out entirely new products for regions where the demand for them was highest.
As a result of this decentralization, and the freedom that it allowed to tailor local store's offerings to their clients, customers are now much more engaged and satisfied, and shop at your stores more frequently as a result.
As you can see, adopting customer intimacy can take a lot of thought and effort. But, by gaining insight into the specific wants and needs of your customers, you are better able to meet and even exceed them. This also enables you to build strong, personal relationships with your customers, driving loyalty and retention.
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Read our Privacy PolicyIs Customer Intimacy Right for You?
Changing a company's nature or culture isn't cheap or easy. But customer intimacy can create a more sustainable and profitable model for some.
Ask yourself the following five questions to decide whether customer intimacy is right for you:
- Is your organization finding that delivering a high-quality product and good customer service aren't enough to create a strong brand any more?
- Is the profit margin on your product already so small that you can't reduce prices any further? Does that create a situation in which you want to offer more value to your customers, but you don't know how?
- Do your customers tell you that they'd like an all-in-one solution to a problem, instead of the product that you currently offer?
- Are you frustrated that you have access to plenty of data, but your organization doesn't use it to create meaningful change?
- Are you trying to use social media to get your brand's message out there, but finding it difficult to get your voice heard and to build relationships?
If you answered "yes" to most or all of the above, then switching to a customer intimacy model may be a solution.
Four Steps to Developing Customer Intimacy
Customer intimacy is more than just aiming for customer satisfaction. It goes beyond that and requires buy-in at every level of an organization to be successful. Here are four steps that you can take to encourage this kind of transformation within your organization:
1. Empower Your Team Members
Give your people the tools, training and resources needed to give the customer exactly what they need and want. Inspire and encourage your people to deliver an outstanding customer experience at every point of contact. Our article, Customer Experience Mapping, has some great tips and tricks on how you can achieve this.
Boost your people's engagement with the project by recognizing and rewarding those who go the extra mile. Make sure that you recruit people who share your commitment to customer intimacy. Everyone should be taught to recognize a customer's lifetime value to the organization, rather than just look for the next transaction.
2. Use Data Effectively
Learn as much as you can about your customers. Talk to them, visit them, gather feedback, and analyze their activity on your website.
Encourage your people to monitor trends in your wider industry as well. Do a PEST Analysis to determine the political, economic, social and technological trends currently affecting your organization and your industry.
Once you have all the relevant information that you can find, you need to understand how to store it, make sense of it and interpret it effectively.
3. Narrow Your Customer Focus
It might seem harsh to say it, but not all customers are equal. You need to be pragmatic and focus on those customers who you believe will provide the biggest return on investment.
As in any relationship, intimacy requires knowledge and understanding, and an investment of time and effort. This investment costs, so you need to identify those customers or market segments that provide the highest value to your organization.
When you have identified the segments that you want to serve, appoint teams or account managers who will take responsibility for each. Provide them with deep training and knowledge on their particular single segment, rather than giving everyone the same broad overview.
4. Explore Outside Partnerships
Work with other companies to find a solution, if you believe it to be in the customer's best interests. For example, e-commerce giant Amazon.com® sells products from other, smaller retailers on its website. This enables it to offer a greater range of products than it could stock on its own, and it means that customers don't need to leave the website to get what they need.
Tip:
You can also use the principles of customer intimacy to think about how you could better serve "internal customers," such as your colleagues, stakeholders and shareholders.
Although there aren't necessarily the same opportunities for collecting and analyzing data, this can significantly benefit your working relationships and improve your ability to attract and retain talent.
The Challenges of Customer Intimacy
Customer intimacy can only be achieved if your whole organization embraces it. The customer's needs must drive everything – from product development and manufacturing to administrative and back-end operations. This means that leaders and managers may need to decentralize some decision making, so that their team members can learn and adapt quickly to customers' needs.
You'll need to be able to capture data and develop insights about your customers at every stage of their journey with your organization, not just when they buy something. Ideally, you will learn things about your customers' behavior that even they aren't conscious of. For example, your data might reveal that a certain type of customer makes their highest-value purchases at a specific time of the year. You can anticipate this, and offer deals or product advice that match this pattern.
Your organization also needs to be agile enough to respond to the data that you collect, for example, by changing its procedures and goals, where necessary.
There may be times when finding the right solution for your customer means that you join forces with another company. In fact, you may need to maintain an "ecosystem" of partners to provide a range of production and delivery services broad enough to satisfy your customer needs. Identifying suitable outside partners, and coordinating schedules and communicating with them, can be time consuming.
It can also be risky to focus on and invest in a single customer or small market segment because you can lose the security of having a diverse portfolio of clients. If the market shifts and an alternative product becomes more popular, it may be extremely costly for you to change your strategy or reposition yourself in the market.
Key Points
Customer intimacy is one of the three elements of Michael Treacy's and Fred Wiersema's Values Discipline Model.
It's a highly customer-centric strategy, in which an organization strives to build a lasting personal relationship with its customers, by continually customizing its offerings to meet their exact needs and wants.
You can develop customer intimacy by following these four steps:
- Empower your team members.
- Use data effectively.
- Narrow your customer focus.
- Explore outside partnerships.
Although an organizational strategy that is built on customer intimacy can have huge payoffs, it's not without its challenges.
It can be risky and costly, as it requires a whole organization to buy into putting the customer's experience before the bottom line. It can also be time-consuming and require a lot of upfront effort, as it involves a high level of data collection, customer research, and behaviorial analysis.
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What a great observation, and I totally agree with you. In my work, building relationships is 50% of the work I do, and the importance to me being successful or not lies primarily with how strong those relationships are.
We often know exactly what we want to buy - and we have a wide variety of suppliers to choose from. For me, the supplier that wins time and time again is the one with whom I have an established relationship. It's one who cares about my needs and knows how I want to be served / helped. It means that they've taken the time to build a relationship with me.
Succeeding in business isn't only about delivering a great product, it's also about building strong and lasting relationships.