When it comes to knowing one’s customer, it’s safe to say that not many do it better than Urban Outfitters. According to the company’s management, their ‘upscale homeless’ customer is 18-26 years old, an apartment renter who has a band, and “the girl who has not realized that quirky is sexy and that being a hipster is not simply a marketing tool, it’s someone that just does something differently than others.” How’s that for specific? They go further to describe the customer of another one of their companies, Anthropologie, as a bit older than Urban’s customer, with a little less angst, who “is a homeowner, and more likely than not, is married with children”. She is an optimist who’s aware of what’s going on in the world, but chooses to focus on the positives, not the negatives. She “is the type of customer you want to have at a dinner table”.

While the level of detail Urban Outfitters uses to describe their customers could seem cringe-worthy to some managers, savvy executives understand the significant impact that strong customer focus has on business performance: high levels of customer satisfaction and, more broadly, increased sales growth and market share. In the language of organizational culture, this competency illustrates a company’s ability to translate the demands of the business environment into action. Urban Outfitters’ strong customer focus is a real-world example of how important organizational culture is to business success: Over the last year, the company as a whole (Urban Outfitters, Anthropologie, and Free People) saw a 13% sales increase up to $2.8 billion.

But not all businesses are as adaptable as Urban Outfitters. Let’s look at J.C.Penney as an example. The company has undergone an incredible amount of change in the last few years. A new CEO, Ron Johnson, a former executive at Apple, was brought in two years ago to turn the ailing company around. With an unlimited budget to support him, Johnson began taking drastic measures to turn the company around. He added a Denim Bar (similar to Apple’s Genius Bar), did away with in-store coupons (a fan favorite) and asked that employees roam about the store with iPads, offering to ring up purchases and search for other sizes or styles on J.C. Penney’s website at a customer’s request.

While these changes may appeal to customers like Apple’s, they did not seem to resonate with the customers that mattered most: J.C. Penney’s! An example is the company’s in-store coupons. Johnson wanted to create an “experience and lure shoppers with everyday low prices rather than the sales for which the chain has long been known.” But without a deep understanding of who J.C. Penney’s customers really were, and what type of shopping experience they valued most, Johnson’s actions actually “alienated the existing customer base without drawing in new shoppers quickly enough to replace them.”

As a result, J.C. Penney saw $4 billion in losses during Johnson’s brief stint as CEO. In fact, the company was so disappointed with his performance, that they quickly brought back the old CEO, Mark Ullman, to replace him. Many worry that this move will mean a regression back to a lot of what got J.C.Penney into trouble in the first place. And Ullman has already made a big mistake in his short time back: he turned down the chance for J.C.Penney to be the first retail chain to have a fully integrated store on Facebook – a place where Americans spend 7 hours a month, on average!

While no one, least of all the CEO, likes to make mistakes, another important aspect of effective organizations and leaders is the ability to learn from those mistakes. And from a TV ad that J.C. Penney recently released, the company is indeed learning from its mistakes and strengthening its customer focus. Set against soft music and sweet imagery, the ad’s narrator declares that…

“ what matters [about] mistakes is what we learn. We learned a very simple thing, to listen to you. To hear what you need, to make your life more beautiful. Come back to JCPenney, we heard you. Now, we’d love to see you.”

So how effective is your organization at translating the demands of the business environment into action?

  • Do all members have a deep understanding of customer wants and needs?
  • Does customer input directly influence your decisions?
  • Do you view failure as an opportunity for learning and improvement?

 

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