Ever wanted to know what Outside In is? Well, Charles Bennett, Certified Process Master, BP Group Commercial Director provides a perspective on introducing Outside-In in this white paper. Download it here or click on the image below.

Walk through any shopping centre and it is hard to miss the “Sale” signs out front of nearly every retail outlet. There is no doubt retailers are doing it tough right now but should this be a surprise to us. If we look around the retail landscape, there have been very few significant changes in the past 30-40 years.

Unfortunately, with this inability to adapt to change, retailers falsely believe that the only thing they can compete on is price. As prices continue this downward spiral, you could assume the winner would be the consumer; but at what cost? Prices may be going down and as a consumer, you may think this is a good thing but unfortunately, the price squeezing is also having a negative impact on the quality of products. Think of it, with the exception of LEGO, when was the last toy you bought that managed to survive longer than its batteries? Price reductions have also played a significant part in the decline in customer service to the point where today, customer service has gotten so bad that if it is not terrible, we as customers are relieved.

Contrast this to consumer behaviour, which has changed dramatically over the last 30-40 years, in particular the past decade. We are now in a new are, the era of the enlightened customer. At the end of the first decade of the 21st century, this so called enlightened customer has emerged as a result of a number of factors.

• Customers today have so much choice: there are so many more retailers offering the same, or similar, products and services, customers have a myriad of retailers to choose from.
• Customers have become promiscuous: where generations before showed loyalty to their retailers, generations today show little evidence of that same loyalty.
• The rise of the prosumer: many customers do their research on their products and services prior to entering the store. In many situations, customers often know more about their purchase than the person selling to them.
• Customers have become rebellious: it was once said that when a customer had a bad experience, they were likely to tell 20 people. In today’s always on society, if a customer has a bad experience, they could be telling millions of people through social networking sites in a minute. Think of the impact this can have on a retailer’s brand.
• Customer expectations are changing: many retail outlets, such as the Apple stores, are changing customers’ expectations forever. When customers experience the level of service they receive in an Apple store, there expectation is changing and they are craving the same level of service from other retailers.
• Multiple channels: customers want to do business their way, through the channel of their choice and they expect the same level of service through every channel.
  

With competition at an all time high, customer service, prices and quality at an all time low, Australian retailers have shown few signs of changing their game or doing things differently. The only answer seems to be to increase the marketing and reduce the margins.

There is something else to be fearful of on the horizon, successful international retailers are now establishing a foothold in Australia. These retailers have succeeded overseas and now see plenty of an opportunity in Australia and this may change things forever.

One of the newest arrivals scheduled to reach our shores in the near future is Zara, the Spanish fashion company. Behind the success of Zara is a complete and total alignment to what customer’s really need. They have truly challenged the fashion industry, turning it on its head by doing something that few thought possible. Where it used to take the leading fashion retailers in excess of 18 months to get fashion to consumers, Zara’s model is all about velocity and they can now put fashions in store in less than two weeks. No more waiting to purchase next year’s fashions, at Zara you can have fashion now.

Few signs of this type of innovation exist in Australian retailers. It is not too late, but Australian retailers must understand that the game has changed. It is no longer sufficient to wait for customers to enter your store because the customer experience starts well before the customer leaves their home and the experience is not over until they return.

There is still an opportunity for success, but it will take a significant mind shift. It is time to stop trying to trick customers with gimmicks or over promising and under delivering; it is now time to change perspective, to look at the retail experience from the customer’s perspective, to take an outside in approach.

By changing the focus to the entire customer value chain, and by making a commitment to making their lives easier, simpler and more successful, opportunities abound. And it is precisely this change and this commitment to deliver value to customers, to truly understand the needs of customers, this shift in focus toward the success of the customer that is at the heart of the success of some of this century’s most successful companies.

Does a seller (or buyer) really care how many properties a real estate agent has sold this year, or what the value of the properties they sold is. In fact, even the best real estate agent spending thousands of dollars on advertising and marketing to sell a property will not guarantee its sale. So a lot of the time picking an agent comes down to price, luck or more often these days it comes down to community; word of mouth.

A real estate agent is someone who acts as an intermediary between buyers and sellers of property, trying to find sellers who wish to sell and buyers who wish to buy. Estate agents typically provide marketing services for sellers to assist them sell for the highest possible price, and assist buyers by helping them purchase property for the lowest possible price under the best terms.

While the act of selling a property or buying a property may be the most important steps in moving house, there are a significant number of steps that need to occur to ensure a move is successful. A customer must find a solicitor to deal with the contracts, ensure they have finance available, ensure they have a removalist organised, make sure insurance is organised, organise any number of trades and service people to clean, wash, paint, fix and mend.

So the question is, who is actually delivering the service that the customer really needs? Whose responsibility is it to ensure that a customer is getting what they need? Well, estate agents may be selling a house, helping to buy another house for a customer but does this alone make the process a successful one? What about the steps in the middle. I’d say the answer right now is nobody provides what customers really need. So if a real estate agent was looking do differentiate themselves from their competition, perhaps the best way is to make one customers life easier, simpler and more successful by delivering the all services they really need, taking an outside in approach, seeking opportunity in  the customer value chain. Then when one of their friends asks which real estate to use, they will have no hesitation in recommending the services of the real estate that delivers the full service.

I frequently use public transport to get around Sydney and when I recently found myself needing to get home in a hurry. I quickly went to Wynyard and saw a bus I knew would take me home. Unfortunately the driver was attending to something in the cabin at the time and the bus doors were closed so I waited patiently outside the bus, waiting for him to return but also in the knowledge that I only had the correct fare sitting in my hand and not a pre-paid ticket as the ticket machine was some distance away. Eventually the driver returned, opened the door, I stepped onto the bus, indicated where I wanted to go and went to hand him my money when he said you need a ticket and I'm about to go. So I missed the bus.

Reluctantly I went to the ticket machine to purchase a ticket. I was asked which ticket I wanted, told how much it would cost and after paying the money, I got what I payed for, a ticket. Nothing more, nothing less, just a ticket. Not surprising as this was a ticket machine but you would think with today's technology, over 40 years after the first man landed on the moon with hand held mobile devices that play music, record video and even allow you to talk to other people, that a machine capable of dispensing a ticket could do more than just dispense tickets.

For example, there are a number of ways of getting around the city, bus, train, ferry, walking. There are even a number of buses that can take you to the same destination, some faster than others. If my goal was to reach a destination in the shortest possible time, why couldn't this marvel of modern science, the ticket machine, ask me my destination, calculate the quickest way to get there, provide me with a number of trip alternatives and dispense the appropriate ticket. Why is the onus on the passenger to understand which ticket they need and which bus stop to go to to get to their destination in the shortest possible time.

I guess there are two answer to these questions:

1. Passengers needed to have tickets before boarding the public transport system and Transport NSW had to have a way of dispensing tickets to passengers so immediately they looked for a ticket dispensing machine.
   
2. After identifying a desire to "efficiently" dispense tickets, there goal was then to find someone that could supply ticket dispensing machine. They didn't look to address the needs of the customer, that is, how can we assist a passenger on their journey, what they did do is address an internal need to dispense tickets and so they ended up with ticket machines, nothing more, nothing less, the ticket machine does what it says it does.
   

So many times do we see the root of all system design problems being a lack of understanding or lack of articulation of the successful customer outcome. The result of this is inside out thinking and an approach to developing systems with a complete ignorance of the customer. Had Transport NSW looked to address the customer need and taken an Outside In approach, the resulting ticket machine system could have been more like an automated travel kiosk, capable of helping customer reach their destination by the most efficient means, achieving a successful customer outcome and making passengers lives easier, simpler and more successful. Alas, we are left with ticket dispensing machines and confused passengers.

Say you are planning the trip of a lifetime to an exotic location, just you and your partner. You start getting excited once you have made the decision to go and the next day you book your holiday leave with work and front the travel agent to plan the big adventure. You spend weeks looking through the glossy holiday brochures, days talking to family and friends, hours talking to travel agents and then you finally choose your holiday.

The day arrives when you make the trip to the travel agent to book everything, the flights, the hotels, the transfers, the insurance and then you come to a big moment of truth, payment. In order to secure your holiday, you’ve got to pay a deposit of 30%, 90 days prior to departure and the balance, 30 days prior to departure. You’ve got some money set aside but you and your partner need to save money over the remaining time to have enough to pay for the trip whilst also having enough spending money.

So, you need to set yourself multiple financial goals in order to book your holiday, pay the balance and have enough spending money. Go to the bank right now and they can offer you any number of accounts, savings accounts and term deposits all with different interest rates, fees and conditions.

How many of these bank accounts are truly aligned to the success of the customer, in this case the holiday maker? The holiday maker’s success in this case is to have a fantastic holiday. How many of these accounts help the holiday maker’s life easier simpler and more successful.

What could this account look like?

1.       It should be easy to set-up - perhaps an online account

2.       It should be easy to deposit funds – in person and online

3.       It should know the customer goals – how much money is needed and when

4.       It should provide a competitive interest rate – help the customer achieve the goal and don’t charge fees

5.       It should encourage regular saving – provide regular updates, show how much needs to be saved per week/per month and how close the goal is

6.       It should automatically pay the deposit and balance when they are due – don’t put the onus on the customer to make the payments, schedule the payments automatically

7.       It should be flexible enough to be used for buying things when on the holiday – don’t suspend activity on the account because of suspicious international transactions, the customer is on holiday

8.       It should be easy to close – when the holiday is finished and the customer returns home, close the account – no fees, just confirm the customer is safely home and close it.

If one bank can get this right, they will be on a winner and on their way to becoming outside in. Then someone will see there are other revenue opportunities in the customer value chain like insurance, what about if the bank partners with a hotel chain or airline so that the customer can get a discount on their holiday. Then there are the day trips, restaurants, shopping, photos & video, potential partnership and revenue opportunities for the bank but more importantly opportunities to make customers lives easier, simpler and more successful.  Success will breed success, the next thing might be a car account, then an education account, then who knows, maybe even a home account.