In their book Angel Customers & Demon Customers, Selden and Colvin convincingly present the argument that the only true value of a business comes from its customer relationships. Kaplan and Norton’s example of a strategy map and the balanced scorecard begins with a learning and innovative environment objectives and ends with customer relationships leading to satisfactory financial results and finally shareholder value. Gary Cokins, a seminal thinker and author of many books on managerial accounting writes most companies are stuck with accounting systems that will only produce product profitability numbers and haven’t graduated yet to customer profitability analysis despite the holes this leaves in an organization’s business intelligence. 

Sadly, it is not only the accounting department that sometimes fails to see the importance of these relationships.  Sometimes the entire organization fails to see this, leading to a failure of the corporate culture.  One example of such blindness is when  the business is organized around products rather than customers. There can be a lack of a coordinated effort dealing with the customer that is often at best mildly irritating to the customers and at worst relationship threatening. 

Let me give you a recent example that happened to me and perfectly illustrates the above points. As a college professor, I will choose textbooks for students every semester.  Those who are connected to colleges and universities also understand the competition among book publishers is fierce.  In such situations (and as a general rule), the product becomes a commodity and the competition then revolves around services.  The commoditization of the textbook means the price falls and the ancillary materials become the battleground. The cost of textbooks has risen so much in recent years that many  colleges have joined the OER (Open Educational Resources) movement, attempting to save college students the often exorbitant cost of the textbooks. 

 In this particular case electronic textbooks provide the perfect venue for publishers to reduce cost and provide ancillary services.  Professors and instructors will often look for the publishers to provide such materials as instructional videos, slide presentations, question banks for exams, an example syllabus etc.  The publisher will provide a software platform where students can access appropriate ancillary materials such as the slide decks and videos. Professors who are often pressed for time will look to these materials to deliver a more robust and interesting course.  After all, a single professor’s time is limited and materials such as the publisher’s educational videos are always quite good.  For instance, I could not hope to produce the slick videos about a subject a major publishing house does. 

Some universities will attempt to keep similar courses on the same publisher’s platform.  So for instance all accounting instructors will use textbooks from the same publisher so the students will only have to learn one publisher’s platform.  Professors using different  platforms force students to spend time mastering the platforms rather than learning  the subject matter. Students also have limited time to master software so standardizing the software platform will reduce their frustration and economize on their time as well. 

My university does not require department wide standardization but there are obvious benefits for me to do so. First my time learning platforms is minimized. Secondly, I teach various upper level courses in my discipline.  The same students will often register for several of my classes. Having the same publisher and platform for all of my classes will benefit at least some of the students. So, I decided to finally standardize the publisher and the platforms I was using. 

 Boy, was that a big mistake.  I couldn’t imagine a more painful process.  The publisher was product centric rather than customer centric.  Yes, the textbooks were technically superior, and were superbly integrated with their software and the University’s learning management system.  However the implementation of the products was stressful to say the least.  First, there were two different divisions of the same company marketing accounting textbooks using two different platforms.  This would never occur to me and was never explained to me until it was too late. I wanted to move four courses over to this publisher.  To my horror, I subsequently learned two of the courses utilized one platform and two used the other.  My dreams of standardizing were dealt a severe blow. 

The problems were further complicated by a less than satisfactory job of explaining the implementation process and ensuring it would work for the students. This division took the “better mousetrap view” to customer service, a definite product-centric approach.  After the sale, my contact disappeared and I was left speaking to the technical staff to fill in the gaps  the failed implementation caused. Needless to say this was less than satisfactory. 

The comedy of errors continued with the rep from the other division calling and introducing herself as my new rep, not knowing I had already been speaking to the other side of the house. I naturally assumed this would be the person who would clean up all of my woes and had been sent by the publisher to be the new spokesperson for it.  Wrong. This poor person trying to be helpful simply got in the way when she introduced her technical person.  Finally, in exasperation I contacted the vice-president of customer service (of which division I am not sure).  While expressing some sympathy for my position, she offered no other solace than to suggest she could provide some Starbucks gift certificates to my students for their inconvenience.  This saga is ongoing as this is being written.  I spoke to at least seven people from the publisher with no concrete result. 

What are some of the take-aways?

  • Organization structure affects outlook. A customer centric organization rather than a product centric organization is often  the way to go. In this situation no one person could speak for the publisher.  More people simply got in the way. When multiple people are responsible then no one is responsible. 
  • Customers need to be analyzed to see how profitable they are.  In my situation Moravian University was established in the eighteenth century.  It is not going away.  I could have been the door opener for the publisher. Every sales organization strives to increase customer penetration and grow sales.  After all, it is much easier to grow existing customers than to find new ones.  Successful implementation could have brought other professors to use what is admittedly a superior product. After some initial investment of time and energy it would have been possible for the publisher to obtain new sales.  Again, one division did not see it that way and tried to make the quick hit and move on. This could jeopardize the entire relationship. 
  • Another method of increasing sales is cross-selling products.  The vice-president’s first question was how many students were affected by the problems in this course. This class was relatively small since it was an upper level elective.  It seemed as if the vice-president lost interest when finding there were only fifteen students enrolled.  However, the true market here was first all of the courses I teach in all semesters and then the possibility of attracting other professors to adopt the publisher’s textbooks.  A life-cycle approach to looking at customer profitability is the correct way to analyze profitability. 

Remember, “If you build it they will come” works well in the movies, but not so much in the real world.  

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