DON’T JUST RELATE - ADVOCATE!
A Blueprint for Profit in the Era of Customer Power
By Glen Urban
Wharton School Publishing $27.95

In business as in art, we live in a postmodern era. Old certainties are being demolished and relationships redefined. Leaders are told to think of themselves as servants, competitors are advised to co-operate, and strategists warned that strategy-making is no longer their sole preserve. Everything you thought you knew about business has been upended.

The relationship between companies and customers is no exception. The old notion that producers produce and consumers consume is regarded as passé by management theorists. These days, value is more often co-created by producer and consumer.

For example, innovations are as likely to come from customers as from pointy-headed PhDs in corporate labs. In extreme cases (thinkopen-source Open Source software) consumers are cutting producers out of the game altogether by collaborating to build their own products. How postmodern can you get?

In his latest book, Glen Urban offers his prescription for survival in this topsy-turvy world. His answer, as the title of the book implies, is that producers need to move far beyond cultivating relationships with consumers. The future, he argues, belongs to companies prepared to act in the best interests of their customers at all times, even if it means advising them to buy elsewhere.

The notion ofBut “customer advocacy” goes beyondinvolves more than simply turning away unprofitable business. Prof Urban, on thea faculty member at the of the Massachussetts Institute of Technology’s Sloan School of ­Business since the mid-1960s, urges companies to steer even valuable customers in the direction of competitors if they would be better off.

On first hearing this sounds not only idealistic but also unrealistic. Since when was anyone in business happy to act as a salesperson for a competitor? This is “coopetition”, the phrase coined by economists Adam Brandenburger and Barry Nalebuff to describe co-operation among competitors gone mad.

But Prof Urban argues his case from a pragmatic starting point. Today’s internet- enabled customers have all the information they need to make informed choices and access to a greater variety of alternatives.

Moreover, they are becoming harder to reach. As media outlets proliferate, primetime advertising no longer reaches a critical mass of consumers. The old “push-pull” approach to marketing – pull by media advertising, push by price promotion – has started to break down.

The answer: spend less on push-pull marketing and more on developing the best products available. Then aim for complete transparency, disclosing everything that a customer needs to know to make an informed choice.

“Far from being foolish, the honesty of advocacy reflects the reality that customers will learn the truth anyway. If your company is distorting the truth, your customers will detect those falsehoods and will act accordingly.”

There are echoes here of Fred Reichheld’s influential work on customer loyalty. Mr Reichheld, a consultant with Bain & Co, pointed out that loyal customers are not only as a rule more profitable than new customers but also a ­valuable sales resource. Satisfied customers may come back again. Loyal customers will recommend your service to friends, family, colleagues or anyone else within ­earshot.

Shoshana Zuboff, formerly of Harvard Business School, is on a similar track. In The Support Economy, co-authored with her husband Jim Maxmin, she argued that companies that were geared up for mass production were notably bad at meeting the needs of today’s informed but time-constrained consumers. Organisations that could be trusted to steer customers towards the best possible product or service would enjoy a powerful competitive advantage.

Yet in the wrong hands, this is dangerous stuff. A company that tried to become an advocate for its customers without first developing great products would be doomed to failure. Helping your customers figure out that your products are sub-standard is not much of a strategy.

As Prof Urban points out, however, businesses built on solid foundations of quality, service and value might also think about competing on trust, too.

Thus Dell could start to help customers build the best system for their needs, not just the best product in its range. Southwest Airlines might make it easier for customers to compare its services to with other carriers by giving online travel reservation services access to its schedules and fares.

The rub, of course, is that great companies like such as Dell and Southwest do not need to move in this direction. They are doing very nicely already. Yet the companies that need badly to develop new sources of competitive advantage (Hewlett-Packard? Delta Airlines? General Motors?) are in no position to start steering customers away.

Then there is the tricky issue of corporate culture, dealt with by Prof Urban in a few short pages but worthy by itself of a whole book. Customer advocacy requires transparency, honesty and a focus on the long term. Yet most managers have been raised in environments that reward secrecy, short-termism and spin.

Yes, the world of business is topsy-turvy. But some things never change.