The Perils of Forgetting Your Customer
In his seminal study published in 1954, consumer behaviour researcher Gregory Stone introduced the marketing world to four types of consumers: Personalizing, Convenience, Ethical, and Economizing. Think about some of your recent service experiences as a consumer and try to identify you “type.” For most of us, the answer is, it depends. For clothing or electronics, you likely choose items that match your self identify and therefore personalize the experience. When looking for utilitarian items such as shampoo or toothpaste, you may opt for convenience (which store is closest?) or cost (what else do I need at Wal-Mart?).
Even 60 years later, Stone’s customer categorizations, for the most part, still stand. More importantly, organizations that ignore or fail to recognize who their customers really are do so at their peril. When working with students or executives on strategy or innovation, I consider two fundamental questions: Who is your customer? and What does that customer really want? Knowing who your customer is today enables service operations and drives a successful customer experience. Understanding who your customer will be tomorrow sets the table for effective innovation.
Let’s look at two recent examples.
McDonald's Lessons, Unheeded
The first is McDonald’s, a firm that has struggled in recent years with an expanding menu, slower service, and numerous failed product launches. In 2013, McDonald’s launched Mighty Wings at 14,000 of their locations across the U.S. Eight weeks later, they were left with 10 million pounds of undigested wings in inventory as the product had flopped (flapped?) with customers. The problem was not the product itself — customers actually loved the big, meaty wing. At a buck a piece, however, they were too expensive for a McDonald’s patron.
With more than 7 percent of the U.S. market by number of restaurants, McDonald’s is still almost three times the size of its nearest competitor, Subway. But innovation blunders such as Mighty Wings do not help the cause. Let’s drill down to better understand this episode. In Stone’s language, who are the typical McDonald’s customers? Surely, it is the Convenience consumer. With so many locations, long hours, and generally fast service, McDonald's gets us in and out in a hurry when we’re hungry. Some can also say the Economizing consumer, in that “dinner out” at McDonald’s runs about $10 per person, less than at most sit-down establishments.
But it could be argued that some of McDonald’s recent struggles are a result of being less convenient (larger menus slow down service) and less economizing, to the point where traditional McDonald’s customers are growing weary.
Some of McDonald’s recent struggles are a result of being less convenient and less economizing, to the point where traditional McDonald’s customers are growing weary
What concerns me the most is that McDonald’s leaders do not seem to be learning from their mistakes. Now on their third CEO in three years, they are innovating again, and once again forgetting who their customers are and what they really want. This week, the House of Ronald launched the Your Taste menu as a trial in one of its New York locations. In a nice bit of process innovation, the restaurant installed touch screens on which patrons place their orders, selecting their bun or bread, meat, toppings, and sauces. Sounds great, right? Perhaps not, considering the price of this new burger is $12.
There are two BIG problems with this move. The first is that the customer-driven order process will likely slow down the ordering process on a menu that includes more than 100 items, especially in groups or families who crowd around the screen asking each other, What are you having? The second problem is that McDonald’s will not attract customers willing to pay $12 for a burger. There are many people (myself included) who will pay $12 for a hamburger or chicken sandwich, but only at a roadhouse or gourmet burger shop. A premium burger like that is a personalizing experience, and McD’s doesn’t draw those customers. As far as I’m concerned, this means back to the drawing board.
Tesla's SUV, In Name Only
My second example comes straight from Elon Musk’s garage at Tesla and sounds very exciting. Musk recently announced a new Tesla SUV, the Model X. This is a good-looking yet small SUV typical of Tesla’s styling and features, set to launch in 2016. So what’s the problem? Think back to those shaping questions for our strategy and innovation: Who is the customer and what does he or she want? In this example, who are SUV customers? They are just about any age but are active and generally haul a lot of ‘stuff’, from golf clubs to baby and toddler gear to skies, bikes, and paddleboards. What do those SUV customers want? The storage space, performance, and utility to get them and their gear where they are going.
Here’s the rub. Tesla’s new Model X introduced a sexy set of so-called falcon-wing doors on the back of the vehicle. The falcon-wing doors look great but how do I install a roof rack on the truck? How do I put stuff on my roof rack with the doors open? If you’ve ever packed gear in an SUV, you likely have opened the front and rear doors to install the racks, ski boxes, or other gear on the roof. Then you stood on the door liner and loaded up. In theory, with Tesla’s Model X, you could keep the rear doors closed and use a step ladder to install and load the roof system in the comfort of your garage, but to work around Tesla’s fancy doors you would need to bring the step ladder with you to unload at your destination. Worse yet, with a roof rack installed, you have to leave the kids at home — the back doors won’t open with the ski box on top.
Most of us give full credit to Musk and his minions for their creativity and innovation. From Paypal to Tesla to his Gigafactory battery plant to Space X and others, Musk continues to push the envelope and drive products and services in new directions. In this case, however, Musk’s team forgot about the customer. SUV customers want a roof and the Model X’s isn’t accessible. An important principle of innovation is that it is fine to fail; it’s time for Tesla to learn from this failure, cancel the fancy rear doors, and go to a traditional design in time for launch.
These examples provide an essential insight: Think about your innovation process. Is the team considering your customers? Who are those customers and what do they want? Most importantly, what will they want next year and how will you deliver? Failure to take these questions into account will lead to failed innovations such Mighty Wings and falcon wings that are likely to underperform through a misalignment to customer needs and tastes.
Barry Cross is adjunct assistant professor at Smith School of Business and co-author, with M. Kathryn Brohman, of Project Leadership: Creating Value with an Adaptive Project Organization.