How Increasing Value to Customers Improves Business Results

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Companies such as Lego, British Petroleum, Baxter, Virgin and Unilever are reversing the law of diminishing returns. How? By redefining what business they are in and then practicing a powerful kind of customer focus.

The author, an international-marketing professor at the University of London, defines customer focus as obtaining value for customers (even if you sometimes help them buy from your competitors) and from customers (who voluntarily continue to patronize your company because of that value). To achieve a high level of customer focus, Lego, for example, must see itself as being in the "edutainment" business, not the construction-toy business. Focusing on what customers want in the edutainment market space, Lego can find numerous growth opportunities — in amusement parks, Web software, television and more. Instead of selling more Lego blocks and suffering ever decreasing returns, Lego can serve edutainment customers in ways that will inspire them to give the company increased amounts of their leisure-time spending.

Traditionally, businesses have concentrated on getting more market share and moving more products and services at the maximum margins. But that approach is too easy for competitors to emulate, and cost advantages eventually diminish. Virgin, like Lego, is proof that the new customer-focus approach works better. Virgin has merged travel and leisure into an integrated customer experience, and in so doing, it has enjoyed an increasing share of the same customers' spending. It avoids the added expense of finding new customers and learning their preferences.

Vandermerwe delves into the six vital components for a successful strategy based on customer focus: giving power to the customer, getting customers to choose a particular business over its competitors, articulating new market spaces, delivering an integrated experience, taking advantage of abundant and reusable resources such a knowledge and information, and creating reinforcing interactions. She explains that, to use customer focus to their advantage, enterprises don't have to be big, be inventors or even own anything. The only requirement is to leave behind transactional, linear thinking and focus on increasing returns.

Sandra Vandermerwe, a professor of international marketing and services at The Management School, Imperial College, University of London, specializes in customer-focus-transformation strategies. Contact her at s.vandermerwe@ic.ac.uk.

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