Photo of woman hanging "Open" sign in store window

Customer Creation Is The Purpose

By JP Snow, Principal & Founder at Customer Catalytics, July 2024

This article is part of our Customer Concepts series, covering core ideas inherent to Customer Catalytics’ Customer Creation Model as necessary for driving growth, retention and scale.

Business Opportunities and Outcomes Originate from Customers’ Unmet Needs

Mutually beneficial trade becomes possible whenever two parties realize they each have something the other wants. When someone realizes they can specialize in repeatedly supplying more of that something, they create a business. Their means of obtaining or creating the product can vary, as can their timeframe, pricing and distribution model. What is constant and foundational to every business is that it must have a customer. Until there are customers ready to buy to resolve their unmet needs, there’s zero opportunity for revenue, profit, growth, value creation, scale or any of the other outcomes a business might say they’re about.

The primacy of the customer has been self-evident for as long as humans have engaged in commerce. The maker of stone axe heads learned it as soon as the first blacksmith showed up. Supply has no value without demand. Supply has substitutes whereas demand for an unmet need ultimately doesn’t. In The Wealth of Nations, Adam Smith dedicated an entire chapter to critiquing the mercantilist emphasis on supply. He wrote, “Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.” Smith considered the customer role so obvious that it’s hard to find much more about it in his entire thousand-page tome on economics. He immediately followed the above quote with: “The maxim is so perfectly self-evident, that it would be absurd to attempt to prove it.”

Perhaps we do need to prove it – or we at least need to remind ourselves that customers and their unmet needs are the bedrock on which all business activity is built. Entire companies get caught up in the frenzy of supply chain management and financial engineering. It’s too easy to forget the critical role of the customer that makes everything else possible. No one has said it more simply than Peter Drucker did in his 1954 treatise “The Practice of Management”:

The purpose of a business is to create and keep a customer.

Revenue growth, operational scale, shareholder value and profitability all depend on creating customers. To remain sustainable for any duration, growth also requires keeping customers through an ongoing relationship or repeat purchases.

It’s not enough for a company to be “customer centric.” Customer creation must be its first purpose. Customer centricity is a term companies often introduce to inject more customer emphasis into a model that isn’t already rooted in customers as its purpose. In the realm of data and analytics, “Customer 360” projects abound. When a company launches a customer 360 initiative, they do so because they’ve lost track of the important details they should know about the customers, the source of their very existence – and their future. Integrating fragmented sources with mismatched data keys is expensive and organizationally complex. For a business to be truly customer centric, customers should be the center around which data, insights, experiences, products and strategy are all organized.

A company focused on creating customers as its purpose will always have direct alignment around a shared cause that drives growth. Fulfilling unmet customer needs serves as a mobilizing force and ultimately determines success or failure in the market. Customer creation is the first foundation of business. For this reason, it’s also the core concept around which Customer Catalytics’ proprietary customer model is designed.

Winners Wow Customers, While Failures Forget Their Focus

It’s easy to see – and self-fulfilling – that the greatest success stories of customer growth executed through a persistent focus on customer creation as their purpose. Amazon’s Who We Are definition begins with “customer obsession rather than competitor focus” as their first principle. In Invested, Charles Schwab reflected on his company’s path to becoming the largest publicly traded investment firm. In a section titled “Riding a Rocket,” he wrote, “I always believed that profits were something that come naturally at the end of the line, if you got the first part right – finding new ways to help the customer succeed.” Founder and early-stage companies know how much they depend on their customers. As companies expand their product lines and become more complex, it gets harder to maintain everyone’s alignment. Maintaining a line-of-sight to customers becomes much more challenging when there are thousands or millions of them, of multiple types, interacting digitally.

Equally instructive as the lasting success stories are the former giants whose downfall was preceded by a loss of customer creation as their purpose. Businesses fail for many reasons including legal liabilities, weak spots in their balance sheets and numerous other realized risk factors. One certain cause of failure is the inability to create and keep customers. Blockbuster, Blackberry and Sears each had created a huge base of customers who continued buying similar products and services following each of these companies’ downfalls. Their failure originated in their not understanding their customer’s unmet needs. These companies likely talked about their customer orientation, but it didn’t translate enough into strategy and action relative to new entrants’ superior approaches to meeting the same needs.

Companies that obsess about creating customers tend to invent “wow experiences” that attract even more customers through word of mouth and person-to-person influencing. They also eliminate the bad experiences and roadblocks that result in not keeping customers. New restaurants know their success depends on the impressions they create in their first weeks. People tell their friends about a great dining experience, and they warn them off from a bad one. Shoe and apparel brands get an automatic boost in marketing every time they create a customer, who then walks around as a mobile advertisement. In many industries, customer creation generates flywheel momentum.

Businesses win on customer purpose through several benefits that work together. When a business resolves to “create or keep a customer” as its purpose, it then:

Orients all activity around the fundamental driver of revenue and growth
Creates the “shared purpose” needed for common culture and psychological safety
Minimizes the organizational silos that inevitably emerge as companies grow
Reinforces integration and efficiency in systems and data design
Generates momentum, leading to a flywheel effect for accelerating growth
Provides a basis for customer service empowerment
Counterbalances emphasis on profits and any other incentives that can lead to financial mismanagement or corporate scandals
Provides a basis for ongoing evolution of company strategy and product planning

Activating Customer Purpose Requires More Than Just a Mission Statement

Many companies tout customer orientation as central to their vision, yet details about their organizational structure and the language they use show how they’re really about something else, typically revenue or production. Chief Revenue Officer positions are on an uptrend, while the Chief Customer Officer has fallen out of fashion. Key Performance Indicators emphasize revenue, profitability and production levels. When the need for a “balanced scorecard” is introduced, it’s typically to inject some focus on customer satisfaction or acquisition to offset the heavy emphasis on immediate profitability. Companies talk about their supply chain as an end-to-end concept but rarely can describe a full customer value model. Durable goods products get tracked via serial and model numbers, enabling robust analysis across their lifecycle. Meanwhile customers remain disconnected across the various systems, including the touchpoints that make or break sales. Companies calculate depreciation on hard assets to the penny, while they have no tracking for their more critical losses from customer attrition.

Activating customers as a company’s purpose requires more than a mission statement. It requires intentional design and leadership reinforcement across every operational area. Organizational structures and department objectives must reinforce customer creation as the over-arching purpose. Recruiting and talent development efforts must cultivate customer empathy and help employees understand end-customer needs. Every business needs an integrated strategy for customer creation that covers product development and experience design. Customer experience must be evaluated systematically and holistically. Research and analysis capabilities must be engineered to quickly detect shifts in customer needs and perceptions. Bigger companies require capabilities to operationalize acquisition and propensity models. Activating customer creation as the purpose requires vigilance as the enterprise grows in complexity and scale.

If you “get what you measure,” then including metrics that reflect your outcomes with customers is critical to activating customer creation. Revenue is a well-established and necessary measure of the consumption of a business’s offerings. Businesses need such clarity on their current state, but they also need to know the trajectory of more foundational customer metrics that take longer to manifest. Topline KPIs must include customer counts, new customers and some measure of their attrition. Attrition can be especially challenging to measure, but it’s necessary for monitoring and fixing “leaks in the bucket.” For large and complex businesses, or any business with multiple design targets, these metrics should also be readily cut by segment and cohort. Customer experience and product penetration metrics are necessary for understanding trends in engagement and loyalty. The success of NPS (Net Promoter Score) as a now universal measure of customer loyalty came about to fill an important gap in topline metrics overly focused on the financials. Journey analytics, sentiment techniques and other modern data tools have enabled new metrics useful for gauging the customer pulse and diagnosing service issues. Any business with a digital presence needs a measure of customer effort. Any business with multiple service channels needs a measure of first-contact resolution. For large companies with multiple acquisition channels, customer growth metrics should include a comprehensive measure of marketing attribution, including brand health and customer service performance as inputs.

How The Lens of Customer Creation Informs Strategic Questions

A clear purpose provides shared values for use in understanding and deciding strategic questions, including the thorny ones. When a business affirms its purpose is “to create and keep a customer,” the strategic questions of the day become much clearer. Of course there will be other factors to weigh. Will short-term revenue be enough to fund through the next development cycle? Are there legal or regulatory considerations? Are there customer segments too expensive to sustainably serve? Such factors should be considered relative to customer creation as the primary end.

To provide just a few examples, consider how the customer creation lens informs just three of the many strategic questions facing modern companies right now:

How much should employees work in a company office?

This debate seems to be one of the most lasting impacts from the coronavirus pandemic. The discussion is too often framed as a zero-sum game where employers cite needs for collaboration and supervision, followed by employees voicing concerns about commuting costs and their most productive working environment. The right answer is determined by what maximizes customer creation. Through that lens, employees should be present together wherever customers expect to see them or when in-person collaboration results in better designs and experiences.

How should we categorize large sources of unstructured language data?

More than ever, call transcripts and agent notes are being harvested for strategic insights. Categorization makes that information more consumable, and it can now be done automatically through AI. If the categories are applied consistently and aligned with the strategic need, decision makers get reports that drive decisions. Too often, they instead get competing reports, each framed to tell a given department’s story. In general, for service transcripts and survey feedback, the right approach is to categorize using a taxonomy based on the customer’s need, also referenced as their “job to be done.” This approach provides a common reference for comparing across channels and a useful input into feature engineering for personalization and propensity models.

What can we learn from our Net Promoter Scores (NPS)?

Billed as “the ultimate question,” Net Promoter has become the dominant method for evaluating customers’ overall outlook with a company. Correctly followed, the methodology provides authentic insights to inform strategic direction and closed-loop systems to remedy specific customer attrition risk. Many companies and even whole industries have built NPS into their incentives and performance management systems. As a result, service reps coach customers or outright ask for a top score, thus eliminating any chance at an accurate reading. Using customer creation as a lens, companies should measure performance separately, to enable a better understanding of their customers and, most importantly, not waste their customers’ time with an inauthentic task.

Summary

The purpose of a business is to create or keep a customer. Or rather, that should be the purpose. Even when there are expectations for certain financial outcomes within a timeframe, even when there’s a goal to reach a higher scale, customer creation is the underlying driver. The purpose of customer creation establishes a shared cause, which drives organic alignment and empowered judgement in the critical moments of truth. Merely stating a customer-centric mission is not enough. Companies must actively design their organizational structures, objectives, and metrics around customer creation and retention. Ultimately, the success of a business depends on its ability to create and nurture long-lasting, mutually beneficial relationships with its customers by fulfilling their unmet and changing needs.

Actions to Catalyze Your Success

Make creating and keeping customers the purpose of your business
Convey customer creation and retention as the fundamental goal of every sales and service interaction, every product plan and every customer strategy
Establish topline metrics that measure customer creation and retention, on par with summary financial and productivity metrics