Customers: Who are they and what do they want?

Customers: Who are they and what do they want?

Sam Choon Yin (10/2004)


            An organisation is customer driven if it focuses on maximising customer satisfaction. To do so effectively and efficiently, it is useful to understand who the customers are and what they want. I will address these two issues in this essay.

            Customers can be grouped into two categories; external and internal customers.

            External customers are those individuals who enter the organisation and purchase its goods and/or services. They are often recognised as essential persons to please in the production chain. Essentially, the inflow of external customers allows the organisation to earn revenue and thus profits. It is in the interest of the organisation to encourage the customers to repeat their orders and refer its products to their friends and relatives.

A typical external customer may decide to buy from the organisation if the organisation is able to provide what he/she needs at the lowest cost. It is also important that the product functions properly and is safe to use. However, there is a trade off between cost and quality such that the latter cannot be raised free-of-charged. Training of workers, setting up of quality laboratory and inspecting of incoming raw materials are examples of expenses that an organisation has to incur in order to raise its product’s quality. Because of this, the firm must find out whether its consumers are more responsive to price or quality.

If price is the winning order criteria (such that consumers are willing to accept lower quality products for lower prices), then it may not be sensible to put excessive attention in raising quality. Priority should instead be placed in efficiency enhancement initiatives. Otherwise, production cost may be raised unnecessarily and thus hurt the organisation’s competitive position.

On the other hand, if quality is deemed essential to win business orders, then the organisation must be prepared to incur higher expenses. This strategy has obviously been adopted by the Singapore Airlines (as opposed to say budget airlines). External consumers, whom are price inelastic but quality elastic, are generally willing to pay a premium for a higher quality product.

How do the organisations know whether consumers are receptive to its strategy or not (either to raise quality standards or be cost competitive)? In other words, how do we know what the consumer requirements are? The answer is communication. There must be continuous efforts taken by the organisation to communicate with and obtain feedback from suppliers, employees, customers and competitors. This is essential so that the organisation could serve its external customers more superiorly.

We know that a product is introduced because there is a demand for it. An organisation may also choose to introduce a new product first, and then adjust the consumers to the product. Regardless of the approach adopted, the interest of external consumers must not be forgotten.

This is generally true in public corporations. Essentially, the government has to improve on a continuous basis and provide public services in a more effective and efficient manner. Otherwise, the public may choose not to comply with the rules and possibly commit acts of terror to overthrow the ineffective government. The same applies to private corporations. They cannot take it for granted that the status quo would remain untested over time. Quality is a dynamic concept that must be raised on a continuous basis, not surprisingly since consumers are marginal thinkers who care about incremental changes, not average and past performances.

The other group of customers are the internal customers. They represent individuals who work at various departments in the organisation. They are essentially customers to one another in the production chain. For example, in the formulation of product design, the sales team provide information about the consumer interest to their operations colleagues so that product specifications are properly defined. On the other hand, the sales representatives may seek support from the operations to train external customers on how to use the new products supplied.

Information must be accurate and forthcoming to create synergy and maximise customer satisfaction. The employees must recognise that a successful organisation would eventually benefit them (like being employed and earning income to feed their loved ones). The converse is true. That is, an organisation with employees sabotaging one another could create chaos in the organisation. The external customers in this case are not likely to obtain quality goods and services. Accordingly, they will not return to the organisation, but instead bad mouth their experience to their friends and relatives leading to loss of business opportunities and closure.

It is difficult, if not impossible, for the organisation to recover from foul ups. In this respect, the notion of getting the job done well the first time very much applies in a customer driven organisation.

The managers must cooperate and strongly support the customer driven initiative. They must convey messages related to ‘being customer-driven’ and practice what they preach. They must motivate and support their staffs by providing them with the necessary tools. These have been practiced in Japanese and German organisations. In fact, being labour-oriented, it is not uncommon there to have employees represented in the company board. This is unlike the American system, which is more manager-oriented. The manager-oriented system believes that the professional managers are able to guide business corporations to perform in ways that maximise social welfare. Unfortunately, this may not turn out to be the case. The managers may act selfishly and find means to expropriate company funds and reward themselves, rather than finding ways to maximise shareholders interest. This seems to be the conventional wisdom today particularly after the outbreak of the Asian crisis, and with scandals which involve well-known and large corporations around the world (including the US). 

Let me move on to discuss briefly the topic on customer requirements. Basically, an organisation is interested to know what customers (both internal and external) look for in a good or service. Since the consumers ‘purchase’ goods and services, they judge the goods and services based on the quality of the tangible goods and intangible services. This essentially implies that an organisation must excel not only in the production of physical goods but also the intangible services it provides so as to enhance its chance in winning business orders and creating synergy.

Because services are intangible, they are difficult to measure and tend to be overlooked by the managers.

It is important to recognise that whenever consumers are in contact with the products and services, the organisation is judged. Every moment of truths matter. A successful organisation is one that is able to manage every moment effectively, and spring pleasant surprises whenever appropriate to enhance the probability of exceeding the expectations of external and internal customers.

The whole package of product and service delivery matters, from the moment the customer enquires about the goods and services to periods after the ‘transactions’ are completed. An organisation should never cease campaigning for business orders and greater cooperation from the external and internal customers respectively. In other words, it must appear customer driven at all times.

Success in the above-mentioned package requires both hard and soft skills. In the former, excelling in technical skills is important. Incoming materials should be professionally inspected, workers must be trained to do their jobs properly with particular focus on quality, and the sales staff must possess excellent negotiation skills to win orders without resorting to unethical means. Soft skills like being able to recognise the needs of regular customers, address the customers by name, courteous, friendly and trustable are also necessary. Soft skills in other words involve the ability of the staffs to look into small matters and as a consequence make the customers feel that they are important. The element of trust (a soft skill) is undoubtedly important and exists in any business negotiations because it is not possible to base every decision on contractual agreements. A customer usually does not want to cooperate with any organisations that are deemed not trustable.

Soft requirements are usually more standardised. As a result, they are relatively easier to predict. For example, a friendly and helpful service provider is often preferred as compared to one who is unfriendly and rude. Predicting and meeting consumers’ hard requirements are more difficult. There are at least two reasons. First, consumers are heterogeneous. Their needs vary both in a static sense and in a dynamic perspective. Second, continuous discovery of new raw materials to work with complicates planning and forecasting. As a result, it is generally difficult to predict the future needs of users in measurable characteristics. As far as satisfying the external customers are concerned, marketing research could lower the severity of the problem. To beat the competitors and advance further in the league requires substantial investments in market research, one area which many Asian companies are unfortunately still lacking.