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The classic framework for defining competitive advantage says there are three options to choose from: Product, Customer intimacy and Operational Excellence (for which read ‘total cost to the customer’).
We’ve all heard about customer-centric organisations, customer focus and other customer-related things. Actually, creating a competitive advantage through customer intimacy is the hardest to achieve. This is beyond service, which today tends to be bundled up into product; it is more about how well you understand your customer and how you craft an offering to them based on needs and wants they may not even know they have.
Companies in this space have a focus on: • Customer Relationship Management (CRM) systems and
processes. • Delivering on time and above customer expectations. • Lifetime value concepts. • Being close to the customer. • Giving decision authority to employees who are close to the customer. MAS is a financial services company headquartered in Johnsonville. For a long time it focused on professionals in the health sector (higher net worth on average than many other sectors), and it provides a wide range of insurance and finance services.
MAS started life in 1921. Years ago when I worked in the insurance industry, it had legendary customer service – competitors knew better than to try to compete for MAS members’ business.
Amazon is another example of customer intimacy: ‘because you bought this, you might like that’. This is not intimacy in the traditional sense of knowing someone at a personal level, but the 21st century version of intimacy (‘big data’) – knowing customers’ tastes, preferences, buying habits through data analysis. Amazon exploits big data better than anyone else on the planet.
The problem is that the customer intimacy model is not that hard to achieve for a small business, but it’s really hard to scale.
For many small businesses, their competitive advantage is the ability to customise solutions for customers based on their very specific needs. I often hear business owners say “customers come to us because they can get personal attention, they can get variations and modifications, in fact they can get anything they want from us because ‘it’s