The Revival Of Customer Capitalism

We are all customers of capitalism, the economic system that advances our material well-being. Historically, capitalism has treated its customers well. Not only has it lifted billions of people worldwide out of poverty, it has elevated quality of life on multiple dimensions from infant mortality to longevity, access to high quality education, and economic opportunities for all.

Some of the most important customers are young people. They should feel confident in the capitalist system, and inspired to strive for the better future it offers—and yet they don’t. In a recent Pew survey, only 40% of 18-29 year olds expressed a positive attitude to capitalism, and a great percentage said they were positive about socialism.

What went wrong?

The golden age of American capitalism can be described as customer capitalism. Great corporations were built on the dynamics of improving customers’ lives. Corporations brought affordable illumination to brighten homes for extended facility time. They innovated in safely packaged nutritious foods. They dramatically advanced transportation and health care and hygiene. They introduced tools and machines to make factories and work more productive. Customer capitalism was an externally-oriented system that looked to markets and end-users and their needs, and strove to fulfill those needs, utilizing mass production, mass distribution and mass marketing to serve as many users as possible.

This external orientation gradually changed, as corporations and the emerging practices of corporate management increasingly looked internally to focus on efficiency through organization, hierarchy and bureaucracy. Customers remained as the source of revenue, but lost their prime influence in the determination of corporate success. Eventually, shareholder value took precedence over customer value as the indicator of capitalist performance. Financial markets expanded at the expense of customer markets, and a big part of capitalism became the trading of stocks and bonds and derivatives rather than goods and services.

Young people observe this world and question whether capitalism serves them. They don’t always feel seen, heard and valued by the economic system. To re-establish their support, corporations must re-establish market-focused customer capitalism as the norm.

Return to customer value

Customer value is the only effective and appropriate guiding principle. The term “value creation” has become standard, as if value was an objective quantity manufactured inside the corporation. Value is subjective, perceived through the individual and variable lenses of customers, influenced by their personal needs, preferences, and processes of evaluation, all of which are subject to constant change. Value is the understanding of a customer’s desired state compared to their current state and moving them towards it. Value is facilitated by corporations rather than created. Success in this endeavor results in revenues (the customer’s willingness to pay for their value experience) and profits can follow. Revenues and profits and shareholder wealth are not the purpose; the facilitation of value is the purpose.

Throughout its history, Nike has been one of the great proponents of subjective value. In the design and marketing of shoes, apparel and equipment, the company exhibits an appreciation for the aspirational value to the customer of access to the tools elite athletes use, and the high value of a sense of achievement at every level of sport.

Leading with empathy

The primary business skill for value facilitation is empathy. It’s a skill that’s not normally taught in business schools and not typically cultivated in corporations. A firm suffused with empathic capabilities can sense the customer’s desired state, see the current state through their lens, and consequently have a better chance of mapping and charting the path between them. The mental model the empathic firm utilizes is the customer’s rather than their own. Listening is an act of heart and mind rather than data collection. There’s less hubris and more attention to values.

Cleveland Clinic has understood value when it commitment to patient-centered care, not only emphasizing empathy in its communication and treatment approaches, but embodying empathic listening by addressing not just the clinical needs but also the emotional and psychological needs of patients.

Enabling customers

Many firms expend resources to improve customer service, helping the customer to better navigate their interactions with the firm and its processes. But the best business models go further in enabling customers with new powers; customer enablement is becoming the norm in the digital era, and may be paving the way for a new phase of customer capitalism. The mechanism is the direct connection. In business models like those of Netflix and Amazon, customer choices and customer behaviors are transmitted straight, and without interruption, to the data layer inside the company that guides internal functions for future features and value propositions. Customer behavior becomes functional information without filtering or translation.

Companies with more traditional business models or structures can mimic this mechanism by allocating maximum importance to the information gathered by frontline employees and operations. This information should flow freely to all parts of the corporation without filtering, and every function within the corporation should be enabled to respond to it adaptively without permission.

Some insurance carriers are extending more and more enablement to customers in claims. Liberty Mutual has established a partnership with the startup platform Homee, which matches homes and businesses with repair needs to approved service providers via a mobile app, without the need for extensive claim validation by the insurance carrier. The result is both an improvement in customer sentiment and a reduction in costs

Dismantling bureaucracy

One of the seemingly irresistible and unstoppable developments in the history of the corporation has been the growth of bureaucracies and the dragging anchor of their rules-based constraints on the free behavior of both employees and customers. Bureaucracy has been called a disease, a cancer and a tax on human achievement. Bureaucracy knows numbers and systems and how to reduce costs, but doesn’t always know value. In a survey reported in Harvard Business Review respondents attributed seven categories of business “drag” to bureaucracy. Business knows the problem, but hasn’t been able to solve it. Young people’s uneasiness with capitalism is, in truth, unease with the corporations who are capitalism’s primary protagonist, and the bureaucratic rules of working within corporations as employees as well as of interfacing with corporations as customers are a big part of their unease.

The only solution to bureaucracy is to dismantle it. We know how to do it. Make teams the organizing unit. Eliminate any structure that bears the name of “department” (especially HR and accounting) and, instead, empower the functions of value facilitation including engagement, operations, technology and marketing.

At SpaceX, for example, Elon Musk has demonstrated what’s possible with this kind of an approach, effectively eliminating middle management and utilizing real time data as much as possible to allocate resources and improve the performance of teams. The company has set new standards of manufacturing effectiveness and efficiency in its industry.

Marketing as love

Traditionally, marketing has been the business function of building relationships with customers. The golden era of brand building was relationship-driven, whether it was the cultivation of trust between IBM and its corporate customers for reliable computing, or the trust that moms placed in Tide for keeping clothes clean and bright. Modern marketing has lost the love and therefore the trust. It’s mechanical and mathematical: numbers of eyeballs, number of clicks, shepherding customers through the “funnel” to the point of purchase, and incentivizing sales forces with hitting targets and closing deals.

A return to the cultivation of customer relationships based on feelings rather than numbers is called for. Brands are valuable assets with real economic value based on positive customer sentiment. Brand building is the art of relationships rather than the practice of marketing mathematics. Internally, companies can be proud of their brands, and brands can exert a culturally binding force. Externally, customers can love brands and brands can catalyze positive feelings towards business. Revival of brand building skills will contribute greatly to the revival of customer capitalism.

Jersey Mike’s has demonstrated what’s possible when love is central to the marketing of simple and straightforward food products. The company’s relationship with customers and franchisees alike is illuminated by virtuous intent, which is further expressed in a charitable giving program that involves all levels of the company and the communities it serves.