Book Review: Angel Customers & Demon Customers
If there ever were an industry that was handicapped by its traditional organizational model of serving consumers based on internally focused silos, it’s the healthcare provider industry. But perhaps a business model called “customer centricity,” outlined in the book Angel Customers & Demon Customers, by Larry Selden and Geoffrey Colvin, might provide some help. While the book itself doesn’t mention the healthcare industry, the book provides many insights that could be applied to help improve the experience patients and their families receive at many healthcare organizations.
The book starts out with an all-too-familiar story of a wealthy customer of a bank who was interested in refinancing his mortgage. Though an active trader with the bank’s brokerage services, and with high balances in a number of accounts with the bank, he was still treated like any other customer when he tried to deal with the bank’s mortgage department. Meaning, of course, that he was forced to jump through all the bureaucratic hoops someone off the street might, despite his high standing as a profitable customer at the bank. Growing frustrated, the customer complained to his investment broker at the bank, who tried desperately to break through the red tape and help the customer with his mortgage. Unfortunately for the customer — and the bank — the manager in the mortgage department was not authorized to step outside of set procedures, even for such a loyal and important customer. Frustrated, the customer refinanced his mortgage elsewhere, and eventually moved all of his savings and investments to another institution — one that served him better.
This story does a great job of establishing the premise of the customer centric model laid out by Selden: instead of serving customers based on internally focused channels — such as by product, as in the case with the bank having separate mortgage, deposit and brokerage departments — businesses will reap far greater success by structuring their offerings around key customer segments. In the case of the story above, a bank might establish a division geared toward “wealth builders” to serve the type of customer portrayed in the story. The book provides detailed arguments for why this model should bring success to most any business, and points to Fortune 500 companies such as Dell, Royal Bank of Canada and Fidelity as examples of businesses that have implemented the model.
Consider the case of Best Buy, the national big-box retailer that has embraced Selden’s model and is highlighted in the book. Instead of organizing stores (and the internal divisions that support them) around appliances, car stereos or computers, the company has focused on key customer segments, such as suburban moms or technology enthusiasts, and designed departments or entire stores (and the internal divisions that support them) just for them.
And how is the model working for Best Buy? The Minneapolis/St. Paul Business Journal reported in December that those Best Buy stores that employ the customer centric model had comparable sales twice that of other U.S. Best Buy stores and produced higher gross profit. When asked about the concept in a Minneapolis-St. Paul Star Tribune article, Best Buy CEO Brad Anderson said: “Best Buy shoppers are saying they will respond to innovation and to a more compelling customer store experience.”
In Angel Customers & Demon Customers, the customer centric model is explained in clear terms, and most anyone with some background in business or marketing can follow the points. There are also chapters on why some companies have difficulty embracing the model, the nuts and bolts of implementing the model, and more.
The book becomes somewhat weighed down in its explanation of the “Customer Segment Value Creation Scorecard,” the formulation that allows businesses to determine who their most important customer segments are. The Scorecard shows how shareholder return is the driving metric in determining which customer segments businesses should target. For example, Best Buy has identified five core customer segments on which to focus, all based on the potential shareholder return these segments can bring. One segment, nicknamed “Barry,” consists of affluent, upscale professional males who, for example, spend a lot of discretionary income on the best home entertainment equipment. Walk into a Best Buy aimed at “Barry” and the entire staff and the arrangement of the products is geared toward pleasing him. Following the financial formulas behind the Scorecard can be difficult, but fortunately it’s not necessary to be a CFO to glean the fundamental strategies inherent in the customer centric model.
What does all of this have to do with healthcare? In reading this book and in hearing the stories of how companies like Best Buy have embraced customer centricity, it becomes clear the value this model potentially holds for healthcare. Remember the bank customer in the opening story, who was forced to deal with investing, saving and mortgage departments separately, not in a way that was beneficial or convenient to him? Compare him to a patient who is forced to deal with radiology, oncology and surgery departments of a hospital, all for the same ailment, but not in a way that is beneficial or convenient to him. Not to be trite, but there is an obvious similarity between Best Buy selling televisions, ovens and computers to a hospital providing cardiology, pulmonology and radiology specialties to patients: they’re both “product” focused. As the book argues, and some companies have realized, designing an experience based on the consumer’s needs, as opposed to traditional organizational structures, can bring tremendous success.
An example of how this model is currently applied in healthcare is an executive health program, which is geared toward a very specific audience: executives in their 50s and 60s that lead very active, and stressful, lives. Take the Executive Health program at the Mayo Clinic in Jacksonville, Florida, which includes, among other services, a full range of preventive screening tests that cover cancer, heart disease and more. These services existed before, but were offered through different departments such as oncology and cardiology. Recognizing the need of the busy executive who could benefit from these tests, a program was developed just with that executive in mind. For example, all tests are scheduled over a one or two-day period to accommodate the executive’s busy schedule. The program then goes beyond the clinical element to further appeal to executives, as noted on the Mayo web site: “Corporate accounts are welcome, and we can arrange for special resort golf outings following your examinations.“
Of course, the model proposed in Angel Customers & Demon Customers doesn’t fit perfectly into the healthcare industry. Mainly, the model proposes focusing on the most profitable customers based on shareholder return and ignoring the rest, something not-for-profit providers could not do. But the concept of shaping offerings around specific customer segments holds tremendous potential for healthcare organizations, both in separating themselves from their competitors, but more importantly in creating better experiences for their patients. If you can make it through the thick financial formulations, this book can provide a new way of looking at your own healthcare organization.