The Empty Whitecoat

Buyer-centric vs. customer-centric: Missing the point

The debate over buyer-centric vs. customer-centric concepts has resurfaced once again in Jennifer Rice’s blog.  In an effort to bring some clarity to this, I blog below extracts from the website of the Buyer-Centric Commerce Forum. Written (I believe) by  Right Side Up and The New Bottom-Line author Alan Mitchell, this provides perhaps the best and most succinct definitional analysis of the distinctiveness of buyer-centric thinking. 

"The first question posed is simply, what is different about buyer-centricity? Isn’t it just another way of being customer-centric, and of doing customer managed relationships (CMR)? Here is the answer:

Customer centricity looks at products and services in their broadest sense – from purchase to use to service to disposal, including related information and services – from the customer’s point of view to meet his product/service needs and wants better.

Customer Managed Relationships looks at the conduct of the relationship (process, communications, transactions) between a particular seller and a customer from the customer’s point of view, to meet his relationship management needs and wants better.

Buyer centricity looks at markets and the process of going to market from the buyer’s point of view.

Superficially, they can be lumped in the same basket. They appear to ‘focus on the customer’ and try to identify and meet the customer’s needs and wants. But there are at least three fundamental differences between buyer-centricity, CMR and customer-centricity.

1) Means and ends. Both ‘customer centricity’ and CMR attempt to meet customers’ needs as means to sellers’ ends. They are adopted as strategies by individual sellers in order to meet their particular selling objectives: e.g. to sell more, more profitably etc. Under buyer centricity, meeting the customer’s needs is not a means to an end. It is the end.

2) Outlook. All seller-centric strategies and initiatives look at the world of customers through the seller’s eyes. Buyer-centric commerce looks at the world of sellers through the buyer’s eyes.

Every seller-centric marketing concept (including customer focus, customer-centricity, CRM, CMR, permission marketing, 1-to-1 marketing, etc, etc) starts from the point of view of one particular seller, with the assumption that this seller is dealing with many different buyers.

Buyer-centric commerce starts from the point of view of each particular buyer, with the assumption that this buyer is choosing from among, dealing with, etc, many different sellers.

Seller-centric marketing is about helping sellers deal with buyers. Buyer-centric commerce is about helping buyers deal with sellers.

3) Source of value. The seller-centric marketer assumes that the source of value for the customer lies in the better/cheaper/etc product or service that he is bringing to market. For buyer-centric commerce, on the other hand, the source of value lies in a better/cheaper/etc go-to-market process for the buyer.

Buyer-centric commerce therefore subsumes and includes seller-centric value, as just one ingredient of a much broader, richer value offering. It’s about sourcing the best/most appropriate product/service (what seller-centric marketing has to offer) plus improving the process of sourcing (and using) this product/service.

In short, in buyer-centric commerce the acid test of success is not whether it helps a particular seller sell more, more profitably, but whether it helps a particular buyer to go-to-market more efficiently and effectively and to source more value, more ‘profitably’.

(In reality, buyer-centric commerce goes way beyond the narrow realms of buyers’ go-to-market or ‘sourcing’ processes – it is about helping individuals maximise the value they create in their own lives and through their interactions with other people/organisations. But that is a broader, and slightly different discussion.)

Buyer-centric commerce therefore represents an entirely new market – a market which requires entirely new business models and probably, organisational structures and operational infrastructures and processes. Constructing an organisation that helps an individual buyer deal with many different sellers is very different from constructing an organisation that helps a seller deal with many different buyers.

Buyer-centricity is also completely counter-intuitive to the seller-centric mindset, which judges every activity and initiative by the degree to which it helps a particular seller sell, rather than helping buyers to source value on the open market. That’s why so many business people, trained and steeped in seller-centric attitudes and assumptions just don’t ‘get’ it. Ultimately, customer-centricity and CMR are still about helping sellers to sell. They still dwell within the territory of seller-centricity.

Does that mean there is no connection between customer-centricity, CMR and buyer-centricity?

In fact, there is a close connection – though not the one most seller-centric marketers see. The connection is this: the processes, skills and infrastructure needed to make customer-centricity and CMR work – understanding of customers’ needs at different points of the purchasing process, developing information systems and infrastructure capable of responding to different individuals’ needs at different times and circumstances through different channels, etc – are all essential for any successful buyer-centric business model.

Concepts, tools and techniques like this are like the chick within the egg. As long as they are kept confined within the narrow boundaries of seller-centricity, their true potential will never be realised."

Moving to a Customer Experience perspective

Regardless of the definitional distinctiveness of buyer-centricity, customer-centricity and so on, in truth all that matters to the individual (you and me) is the quality of the context-specific experience we have with organisations when we interact, transact, communicate, derive and exchange knowledge with them. This interaction can operate across a spectrum of experience types, levels of customer involvement and range of choices, options and channels: whether passive, active, co-creative, distributed, peer-to-peer community, explicit or implicit. Nevertheless, what buyer-centricity does do (as evidenced by these blog debates) is expose the disconnect that now exists between traditional corporate speak for customer-centricity and the new language and framework for individual-centric commerce. As I have repeatedly argued, by acknowledging this disconnect, firms can identify, design and achieve new breakthroughs in customer experience innovation.

Existence precedes essence: Lessons for Future Customer Innovation

An intriguing article by James Ogilvy can be found in the latest edition of Strategy+Business, entitled “What Strategists can learn from Sartre” (registration required). Ogilvy’s thesis in a nutshell is that as individuals become more and more self-determining, independent and unpredictable in the post-modern era (i.e. they have discovered existential freedom and they are no longer bounded by expected norms and behaviours in keeping with their past behaviour or pre-defined ‘essence’) so marketers and business in general must adapt and respond by creating a capacity for “existential strategy” and “customised innovation”. I’ll let Ogilvy explain,

“The old production economy was predictable because it operated in the realm of necessity; it produced goods and services people needed, and those were relatively stable. The new economy plays in the realm of freedom; it produces goods and services for a customer who is not bound by needs. The old economy called for strategies built by engineers who could calculated according to predefined laws. The new economy calls for strategies created by existentialists who understand freedom. Most important of all the old economy operated at a regular pace, in the clockwork time of industrial production. The new economy lurches forward and backward in some new kind of time that was anticipated by the existential philosophers (Sartre, Heidegger etc..)”

Now it could be argued that an important aspect of the "paradox of choice" is that our ability to "rediscover ourselves" in individuated, existentialist terms has come about precisely as a result of the increased choices made available to us by the market economy. Of course, marketers will always argue that choice is the real killer value delivered by the seller-dominated marketing system. Without choice, people will not be as empowered as they are to achieve freedom in the first place. As Alan Mitchell writes in Right Side Up, “Choice is the marketers trump card. It sweeps away all the bad stuff, the inherent flaws and waste.”

But does it? If one part of the equation puts people in control – ubiquitous connectivity and information accessibility - there is another part that is taking us out of control. That is because while choice has proliferated in order to serve customers every need, people often lack the expertise and the time to evaluate all the choices. More information is only useful on the occasions when we want it and there are times when marketers and business simply overload us with choice.

Ogilvy acknowledges this and makes a clarion call for businesses to respond by acknowledging the role of existentialist thought in strategy-making..

.. "existentialism is a philosophy that stresses the importance and robustness of individual choice. In a world where it sometimes seems as though there are too many choices, and too little authoritative guidance in making those choices, existentialism provides a viable approach to strategy - perhaps the only viable approach"

By this he means that just as you and I can determine our own future free of any predefined essence or stereotype (our class, education, trade, income, material wealth, birthplace,parents), so businesses can do the same. They can embrace the foundations of existentialism to escape from the constraints or corporate essences of the past (industry sector, product line, marketing mindset, attitude to customer value, organisational structure etc etc) in order to embrace new and totally different possibilities for the future.

Ogilvy then goes on to define five principles of corporate existential strategy:

1. Finitude (or making hard decisions because you can't do everything). This is concerned with making strategy trade-offs where you have to say "No" to certain options otherwise you are not making strategy. This fits with our own personal need to shake-off excess and the curse of plenitude!

2. Being-toward-death - "If you think your life is not finite, if you think you're immortal, then you may act as if you've got time for anything. If you follow the existentialists in dwelling on death however, each day of your life will gain both preciousness and a sense of existential urgency", Ogilvy writes. To get by, firms need to paint vivid future scenarios of their fit in a changing world. Being toward death provides the immediate motivation to take the actions necessary to avoid corporate strategy decay and ultimately death. This is exactly what The Support Economy aims to achieve... the arguments in which are borne of the paradox of our existential freedom, the surfeit of choice and complexity thrown up by the market economy and the need for firms to innovate around distributed capitalism to embrace these opportunities before they die a slow death ...

3. Care - The concept of "Care" is used by Ogilvy to denote how firms need to be concerned with breaking free of their past, and to care enough about change to reinvent themselves. I think however that his analysis here is a tad too firm-centric. As he points out, "care is a feature that differentiates human beings from purely cognitive, Cartesian creatures. Sure, we think, we calculate, we cogitate. But we do so in a way that is different from how computers do it". The problem with most business strategy is that it is precisely founded on a technical rationalist justification for human behaviour where people become an object(ive) in the firms personal goal to create value for itself. The concept of "Care" should therefore be used, I argue, to denote how organisations need to adopt a more human-centric, participative dialogical view of relationships and real human needs, not just one focusing on what the organisation cares enough about.

4. Thrownness - This, Ogilvy says, is concerned with just "how far" it is possible to change. He argues that firms should understand their past and core competencies, "know them, use them and don't forget them" yet at the same time, avoid "coasting on the extrapolations from the past". It takes "a dancing existentialist" to see the vast possibilities of the future.

5. Authenticity - Finally, Ogilivy includes one of our favourites in his five principles of existentialist strategy. Authenticity, he suggests is not about being true to yourself, "but also openness to the possibilities of the future - not just one possibility, but several possibilities. Feel free to reinvent yourself and your company for an uncertain future", Ogilvy writes.

So what can we make of all this? I agree with the essence (pardon pun) of what Ogilvy is saying. Whilst corporations plough a familiar furrow, individuals are changing and morphing into new forms, creating new needs, building new connected and authentic relationships and generally bypassing the corporate line. In terms of marketing segmentation for example, the all-too-convenient method for boxing consumers into common groups for CRM and other business applications, people are effectively leaping out of one segment and into another as they seek to fulfil different, sometimes the same, needs.

For businesses, one way to address this unpredictability is to 1) acknowledge and 2) build a powerful new capacity for customer innovation; one that moves out of their "own box" and into new realms and possibilities for creating (or co-creating) more personalised customer experiences and solutions. Only then can organisations play a more meaningful and connected role by helping people to live more meaningful, authentic lives - or in other words, creating positive context....

From the Rational to the Relational: Creating "Delightful Organisations"

There is a terrific article in today's Observer (UK) by Simon Caulkin. He picks up on many of the themes articulated by the Beyond Branding authors concerning the breakdown in effectiveness of overly rational and economic managerial practice and its gradual 'reformation' into more relational, humanist and altruistic forms. I quote:

Everything a firm does, from the way it decides strategy or manages people to its structure and board constitution reflects some management theory. .. In turn, those theories are founded on some fundamental assumption of human nature. And the most fundamental assumption in management is that human beings are members of the race Homo Economicus, rational maximisers of self-interest.

As is often said, one particularly potent manifestation of "Homo Economicus"-based management theory is present day marketing. With a growing emphasis on scientific, data-derived, deductive and segmentation based approaches to predicting consumer behaviour, the success of a lot of marketing depends on people behaving rationally to a given set of firm-created influences - price, function, benefit, convenience and so on.

Simon Caulkin is spot on however when he identifies that:

Homo economicus has been softened a bit round the edges over the years. Since people plainly aren't omniscient, rationality is acknowledged to be bounded rather than complete.... (But) what is perfectly obvious to everyone except economists and management theorists is that homo economicus is a caricature that exists only in the world of theory. Homo Economicus would not tip taxi-drivers he'll never see again, offer expensive Xmas presents to people who may not reciprocate, or indulge in any spontaneous acts that brighten every day...

The truth is that in real people, self-interest co-exists with other more generous behaviours and impulses, such as integrity, trust and altruism.... After all, an organisation based on a single dimension of human complexity (rationalism) is likely to be as much of a travesty as the original assumption. It would be narrow, undersocialised and undernourishing to the spirit at best, at worst brutal and driven to destruction.

If we examine rational marketing theory and its overriding goal to maximise individual consumption to the benefit of the firm, we can connect Simon's article to the failure of recent relational developments to release marketing theory from its rationalist ball and chain. Despite the fact that over the last decade, there has been widespread awareness and acceptance of how an authentic relational market orientation can create superior customer and brand value, relationship marketing has been described as being “undermined (even lost) by an unreflective and narrow instrumental adoption”. Zuboff and Maxmin in The Support Economy argue that the widespread adoption of relationship marketing is now having a growing, negative impact on customer perception and experience of brands, even though it claims to resolve many of the limitations of transactional, mass marketing. They suggest that despite the valid discovery of the individual in relational marketing thinking and brand values, in practice many organisations use the approach to pursue transaction cost-efficiencies rather than fundamentally reinvent the means to create and deliver customer value. Tim Kitchin, A Beyond Branding author, makes the same point more dramatically, “The offer remains the same; delivery is not improved. What happens instead is that the transaction is wrapped in a layer of humanity, while the corporation struggles to force its corporate or parental behaviour to catch up”.

Such criticisms are grounded by empirical research into contemporary marketing practice. A study by Coviello (2002) and his colleagues for example, found that most marketing within individual firms is characterised by a hybrid approach, partly transactional and partly relationship building. Although Coviello et. al. were able to conceptualise the pluralistic nature of modern marketing, they acknowledge that their research does not explain why marketing managers choose to implement a hybrid or even a predominantly transactional approach. I regard this pluralistic pattern of marketing practice as illuminating in its own right for three reasons. First, it suggests that many marketers are engaged in a sophisticated form of competitive leapfrogging, where the focus is on the incremental, trial and error improvement of 4Ps marketing mix practice rather than the achievement of a fundamental breakthrough in the role and value of marketing and branding itself. Second, it confirms that marketers use the relationship marketing philosophy, language, techniques and managerial practices to pursue tactical, promotion-intensive, selling goals. Third, the findings demonstrate that marketing management has an identity problem, which underlines why the above writers continue to question and critique its content, emphasis, boundaries and even its very essence.

Without doubt, marketing managers are under growing pressure to adapt to the changing values and behaviour of all stakeholders – whether individual customers, consumers, employees, business partners, institutions or people and society in general. As postmodernist authors Firat, Dholakia and Venkatesh suggest, there is a pressing need for them to find new ways to close the growing gap between marketing and branding practice on the one hand and stakeholder relevance, values and value on the other. In short, they can help to address Simon Caulkin's call for managers to co-create what Warren Bennis, quoted by Lynda Gratton in her new book The Democratic Enterprise: Liberating your Business with Freedom, Flexibility and Commitment , calls "delightful organisations". As Simon Caulkin explains:

(These companies) can be something more than strictly economic units, and that's because they are based on a more balanced and realistic view of human nature than the one-eyed assumptions that currently prevail.

Prahalad on customers as co-creators

It seems that the idea of viewing customers as co-creators of value is about to become one of the hot innovation concepts for 2004. This is simply because CK Prahalad (of "COmpeting for the Future" fame with Gary Hamel) and VK Ramaswamy are publishing a new book this Spring on this important and compelling subject - The Future of Competition: Co-creating Unique Value with Customers. I am mightily encouraged by this as it underlines that my PhD research into the development of firm capabilities for these more advanced "partnership-based" forms of value-creation and customer knowledge management will have real practical relevance and application in the years to come.

This is the precis of the book on Amazon:

In this visionary book, C. K. Prahalad and Venkat Ramaswamy explore why, despite unbounded opportunities for innovation, companies still can't satisfy customers and sustain profitable growth. The explanation for this apparent paradox lies in recognizing the structural changes brought about by the convergence of industries and technologies; ubiquitous connectivity and globalization; and, as a consequence, the evolving role of the consumer from passive recipient to active co-creator of value. Managers need a new framework for value creation. This book is about the emerging "next practices" in value creation.

Increasingly, individual customers interact with a network of firms and consumer communities to co-create value. No longer can firms autonomously create value. Neither is value embedded in products and services per se. Products are but an artifact around which compelling individual experiences are created. As a result, the focus of innovation will shift from products and services to experience environments that individuals can interact with to co-construct their own experiences. These personalized co-creation experiences are the source of unique value for consumers and companies alike.

In this emerging opportunity space, companies must build new strategic capital—a new theory on how to compete. This book presents a detailed view of the new functional, organizational, infrastructure, and governance capabilities that will be required for competing on experiences and co-creating unique value. This is the future of competition.

From this, we can see how the concept of "co-creative customer value" is part of the family of buyer-centric perspectives as traditional firm and industry sectors dissolve and begin to organise around individual value. I hope that with this book and the impetus and interest it will no doubt create, commercial organisations will not only recognise but also take action to acquire and manage new forms of customer knowledge. But to do this, they must first engage in a more open and humanistic dialogue with customers by adopting a common language and shared perspective on mutual goals.. Only then will they be able to develop the necessary co-creative value generating capabilities and knowledge assets to better sense emerging market opportunities and to more effectively “unlearn” established assumptions and practices for creating customer value in the future.

You can read more about my research programme into CKM competencies by downloading a recent publication of mine "Developing customer knowledge management competencies for superior market experimentation and organisational learning" from the Knowledgeboard website.
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