Tag Archives: Customer

DO YOU KNOW WHY THEY ARE YOUR CUSTOMERS?

Regular readers will know the importance of asking the right questions in order to make the intelligence that informs strategy relevant. For example, even if you know who your customers are, if you don’t also understand why they are your customers it won’t only undermine your marketing strategy it will undermine the entire company strategy. How? Read on…..

question-markConsultation is often performed as little more than lip service, as a misunderstood ‘must do but don’t really understand how or why’ exercise before the ‘clever’ people get down to creating the strategy.

And yet, many strategies which look great at first read are doomed before they are even launched because corners were cut during consultation and they fail to understand or reflect reality.

One example is in establishing who your customer is, on the face of it quite a simple thing to research. That extends to who your potential customers are. Again, not exactly a stretch and once known we can plan how to go after them. Not forgetting, as too many do, the retention of your current customers!

Fine. Tick the box. Get on with the strategy.

Wait!

You forgot to find out why they are your customers.

Herb Kelleher

Herb Kelleher

A great example of the value of understanding why they are your customer is frequently relayed by Herb Kelleher, one of the founders of Southwest Airlines in the USA and their former CEO and Chairman. The way he tells the story it is one of knowing who you are in competition with but, as you will see, it is also one of knowing why your customer is your customer.

Southwest Airlines are famous for their really low fares which made Kelleher very popular with travellers but less so with his shareholders. In fact Southwest’s shareholders could not understand why they were only charging $79 for a ticket from Los Angeles to Las Vegas when their nearest rival was charging almost double that.

Those shareholders asked Kelleher to explain why they couldn’t charge $129? They would still be the cheapest available flight but profits would surely be higher?

But Kelleher had done his research; he had consulted properly and had asked the right questions. He knew that such a hike in price could hurt Southwest. How?

When Southwest set their ticket at $79 it was no accident. $79 was the cost of driving from Los Angeles to Las Vegas (factoring in maintenance and the like). Kelleher realised that as well as being in competition with other airlines, if Southwest set their ticket price right, they could also compete with the car. He knew that if they raised their prices they would still be cheaper than other airlines but would no longer be able to compete with the car.

Kelleher saw it as knowing his competition (the car) but it was also knowing why those ticket purchasers were Southwest customers. For many it was because they could fly as cheaply as they could drive. Without knowing that, Southwest might have followed their shareholders wishes and raised prices and then wondered why business had fallen.

Now, take a look at your own strategy. Is it based on the shareholders’ or  your own assumptions or Kelleher’s intelligence? Is it based on sound consultation and research or was one (or more) vital question omitted leaving it standing on foundations of sand?

You cut corners when consulting at your (and your business’s) peril.

 

© Jim Cowan, Cowan Global, 2011, 2016

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