Inside Jobs, February 24, 2009

Can Big Be Beautiful?

When it comes to delivering a truly differentiated customer experience, small companies have a distinct edge. In a small business environment where a handful of employees personally serve every customer, know every product or service, and have the authority and responsibility to do the right thing, delivering a unique and personalized customer experience comes naturally.

As companies get larger, however, they often lose that personalized touch. Being big does not preclude the creation of great experiences; it only means that they just have to work a little harder to achieve and maintain it.

Smaller companies have a distinct advantage when it comes to customer experience management. Their very survival depends on managing each and every customer relationship; therefore a customer-centric mindset comes naturally. They are not unencumbered by politics or corporate policies that can get in the way of delivering great customer service. In addition, a handful of employees know every customer and every aspect of the business, which makes them nearly omnipotent when it comes to serving customers. Clearly, sometimes small is truly beautiful when it comes to delivering a great customer experience.

Does that mean that larger companies have no chance of cashing in on customer experience management? Not necessarily; big businesses can overcome many of the barriers that are presented by size and scale. In fact, some large companies have relied on a customer experience differentiation to rise to the very top of their industry.

Being big isn’t always easy. As companies grow, they add channels, markets, products, employees, and thousands of other touch points. They may also add new layers of hierarchy in an attempt to manage new offerings. Each addition can contribute to the exponential growth in the overall complexity of the customer experience. As a result, large corporations can begin to lose touch with their customer’s needs and expectations.

However, being big doesn’t preclude companies from being a leader in customer satisfaction.

Consider the most recent results of the American Customer Satisfaction Index (ACSI) for the Internet Retail industry. The overall king of customer satisfaction in this group is none other that the largest company in the sector - Amazon.com:

Internet Retail
American Customer Satisfaction Index - 2008
Scaled of 1-100, 100 being the best

ACSI Score by Company (Scale=1-100)

• 88 Amazon.com, Inc.
• 87 Newegg Inc.
• 84 Netflix, Inc.
• 83 Internet Retail Average
• 81 eBay Inc.
• 80 Overstock.com, Inc.

Source: American Customer Satisfaction Index. Retrieved from www.theacsi.org on February 12, 2009.

Indeed, big can be beautiful as demonstrated by Amazon.com. Amazon is the oft-mentioned benchmark for customer personalization. Their focus on customer experience has been well documented and discussed. They have utilized technology to provide personalization on a broad scale to provide each and every customer with a sense of familiarity and insight. By leading in customer satisfaction, they are on track to exceed $19B in Net Sales for 2008 according to available 2008 quarterly earnings reports.

Amazon has avoided many complexities that plague other large businesses. They predominantly operate within the on-line channel, which reduces the number of physical locations or markets that they must coordinate. As a fairly young company, they have yet to experience the bureaucracy and paralyzing politics that can build up over decades of growth. And the company still embodies the spirit and vision of its founder, Jeff Bezos, who still runs the company.

Companies like Amazon are proof that large businesses in any industry can indeed compete with a differentiated customer experience. If businesses can overcome the complexities that are presented by size and scale, they can excel at customer satisfaction. By doing so, big can indeed be beautiful.

Inside Jobs, February 6, 2009

Can A Strong Brand Beat a Recession?

Despite dismal economic and business conditions, two companies with strong brands seem to be oblivious to the chaos that surrounds them. In an environment that seems to have no silver lining, Colgate Palmolive and Apple Computer have posted results recently that would make any business envious. How did they do it? Good management and a strong brand appear to be the magical combination to beat even the worst of recessionary conditions.

The current economic environment over the past 12 months has been anything but encouraging. The Dow Jones Industrial Average (DJIA) and NASDAQ Indices are down over 35% since this time last year. The U.S. unemployment rate has risen by 2.3 percentage points - to 7.2 percent - since the start of the recession in December 2007, according to the Bureau of Labor Statistics. The Consumer Sentiment Index reached a 28-year low in 2008, according to the University of Michigan.

Needless to say, the past 12 months have not been conducive to profitable business growth. Yet two companies with strong brands have managed to weather the storm quite well. The strength of their brands has instilled deep customer loyalty that appears to be unbreakable, even when consumer spending is under tremendous pressure.

As economic prognosticators continue to predict doom and gloom, consumers appear willing to spend their hard-earned and well-guarded cash on the brands that they love and trust the most. Consider the recent earnings reports from two brands that lead their respective product categories: Colgate Palmolive and Apple.

Colgate’s (CL) 2008 fourth quarter earnings jumped 11%. Their net income rose to $401.2 million, or 73 cents a share, from $361.2 million, or 65 cents a share, a year earlier. The company, whose brands include Colgate toothpaste, Irish Spring soap and Ajax cleaner, said sales rose to $3.21 billion from $2.9 billion a year earlier. Colgate achieved this stellar performance despite the reduction of worldwide advertising costs by 140 basis points.

Apple (AAPL) recently reported the best quarterly revenue and earnings in the company’s prestigious history. The company posted record revenue of $10.17 billion and record net quarterly profit of $1.61 billion. All of Apple’s key brands showed strong growth: Apple Macintosh® sales grew 9%, iPod sales grew 3%, and iPhones sales grew 88% over the year-ago quarter.

These companies were able to achieve outstanding results in a recessionary environment by establishing and managing a strong brand. That is good news for businesses and economists that are seeking a path to success through the fog of recession.

Apparently, a strong brand can beat a recession. Establishing a strong brand just may be the most critical strategy for any company looking to weather the current – or future – economic storms.

Establishing a strong brand, however, does not happen overnight. A brand is not simply a logo, a tag line, nor a snappy ad campaign. The brand, in fact, is not even defined by the company – but rather the perception that is created in the minds of the consumer. Establishing such a strong and differentiated brand perception takes time and an outstanding customer experience.

As a sign of hope in tough times, companies that have successfully built a strong brand have shown that they can indeed beat the recession.