Be the best for your customer.
Indeed every company wants to make money, the point of marketing is to satisfy a customer’s need profitably. So what many companies do is ask themselves, how can we make money, but few ask themselves, how can we be the best company for our customers? Taking the perspective from upper management in operations we should be asking ourselves what should we focus on? How can we improve total system efficiency? The focus of this article is how can we achieve that through focused operations and an operational interchange.
We will also have a look into the ultra-competitive oligopoly of the cashback industry, identify the forces working against companies in this market, and how we can formulate a focused operations strategy to ultimately be the best company for the customer.
Competitive Analysis
Using the uncontended Porter 5 forces framework with the added element of disruption, we analyzed the cashback industry and identified the following threats.
- The cashback industry as it stands is_easy to immitate
- Related industries such as comparision sites can easily enter this market_Threat of Substitution
- Consumers have_buying power
- Disruption
This micro analysis is important as it gives insight into how fragile the market is. The more forces that work against an industry, the easier it is to change the game. Having a majority of the forces working against the industry standard of cashback companies, it becomes a playground for divergent thinkers.
Differential Advantage
In business strategy, a differential advantage is a core concept in the pursuit of competitive advantage. This is when a company either has advanced technology, superior products and or personnel.
So how can we create differential advantage with a focus on being the best for the customer instead of simply being the best company in the market? Ultimately what we want to do is create an operational focus where the customer is served best. To gain a sustained advantage what we would have to do is ‘ develop ‘ the industry and either lead the way or lead the company away from the market.
CashBack
While consulting with one of the UK’s largest cashback companies they stated that they wanted as minimal interaction with the customer as possible. This showed that their focus was not on the customer, their operations weren’t focused on the customer, but rather on how little work they can do.
The way the current cashback industry works is the company sends the customer over to the affiliate, the affiliate then pushes the affiliate fee over to the cashback company, and then the cashback company makes the customer wait for a lengthy period to get their cash back. This is not very efficient, not how ideas are spread.
So what we did here at Enfranchised, is we took a step back and interviewed 10 people with one simple question in order to identify how we could be the best for the customer. We asked our respondents if they would rather wait up to 3 months to get £20 pounds back or if they would rather receive £15 immediately after completing the transaction? All ten people we interviewed chose option 2. Our 10/10 response provided a foundation for us to create an operational model which serves the customer best. The answers our respondents gave us owe its success to a principle called loss aversion theory, where a consumer/investor places more weight on perceived losses than perceived gains, in this case, the perceived losses being time.
A Focused Operational Interchange
What we have seen from theoretical studies in operations is that when a pull is created and the product or incentive is available to the customer anywhere, anytime, there is an immediate increase in transaction efficiency. So we took the current cashback model and flipped it, so what happens now is that instead of making the customer wait for up to 3 months for their incentive, when the customer is paid immediately, a great deal of pull is created. Added to this the cashback companies are able to make more money by simply paying the customer less, in a shorter period of time.
Going back to the first few paragraphs, where the point of the strategy is not to be the best but to be the best for your customer, and differential advantage. By creating the software that recognizes when the customer has completed a transaction and / whether or not they return their items, triggering payments, and start focusing every aspect of performance on the customer, we start to change the industry, lead the market, and create barriers in the pursuit of sustained competitive advantage. Ultimately this makes it harder for competition to copy and more expensive for them to develop their own proprietary knowledge.
There are hundreds of platforms and industries that can be displaced by changing the way its operational model works.
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