Customer or Kasht(se)mar?

By Bharat Banka

Having a hard time holding on to customers? Use ‘soft differentiation’ to your advantage.
Be it at management institutes or B-schools, the first key learning students are taught to imbibe is ‘customer is king’ or ‘customer-centricity’. However, the real-life treatment of customers is described crudely but aptly in a recent Bollywood flick, Rocket Singh, as “customer itself has mar in it, i.e., die.” An extension of this would be to define the word ‘customer’ as kasht se mar, or “one who is left to die of pain”. Apologies for this Hindi-English reference, but I find the description too tempting and apt to ignore.
When companies approach me to discuss their ideas, my first question usually is, “What’s the pain point you are looking to resolve?” The intent is to assess whether you are taking your idea to customers as you believe they will need it, or whether your proposition is based on hints of pain points from customers. The key is to align your proposition to the customers’ needs and not have it the other way around, unless it is a disruptive or an innovative proposition.
Recently, I came across a company that successfully acquired FMCG brands from a traditional company. Based on its acquisition strategy of benefiting from cost-cutting, it switched its bottle material from old-fashioned glass to modern polymer with obvious cost-arbitrage. The outcome: surprise, surprise! Die-hard loyal customers rejected it, migrating to competing products. Before the company knew it, sales halved overnight. The interesting fact was rejection, despite continuity of excellent product quality, brand name, product design, etc. The conclusion: before making a change, did you check with your customers what they liked about your product and what features they wouldn’t trade for anything else.
It is equally critical that you not try to be everything to everyone. While exchanging notes on global business cases at a recent entrepreneurial summit, I heard an interesting story from a co-panelist. It had to do with a credit card issuer in the West that, under new leadership, mapped spending patterns and consciously chose to weed out customers who paid always in time over the years. It was sound credit, but unprofitable in the long-term, as the company felt it was not in the business of borrowing at market rates to offer free credit. Arguable but interesting, the company decided which customers it wanted to retain so as to run a profitable business.
If flicks like Chak De and Lagaan were considered by Indian businessmen to be examples on passion, leadership and teamwork, Rocket Singh probably has a few lessons on how to win customers. While the criticality of differentiation is undisputed, distinction between hard and soft differentiation is key. While adding extras to a product, remember that making it cheaper or available on credit can be easily matched, being hard features; softer features are usually more difficult to imitate and sustain.
First, give your customer a confidence (distinct from terms) that no one has ever given in the past (for example, through a product / service promise), backed by skin in the game. Second, use spontaneity to show your commitment to the customer, backed by skin in the game and the level of entrepreneurship in your organization, while discussing the engagement terms. Third, make the customers a virtual partner in your growth by sharing your progress with them and acknowledge their role in your progress in a heartfelt way, not as a ritual. These are soft differentiations that your competition may find tough to replicate.
This is all the more significant for enterprises in their infancy, as what they might lack in monetary resourcefulness can be more than compensated for by such soft differentiators. And that, friends, sticks even longer than the longevity of the enterprise in its existing shape and ownership!
The views expressed here are personal.
BHARAT BANKA is the MD and CEO of Aditya Birla Private Equity.
©Entrepreneur February 2010