Keywords
Citation
Churchill, D.W. (2003), "Customer Capitalism", Journal of Consumer Marketing, Vol. 20 No. 4, pp. 381-385. https://doi.org/10.1108/jcm.2003.20.4.381.5
Publisher
:Emerald Group Publishing Limited
This book is must reading for CEOs, marketing managers, and anyone who desires a superior business model offering exponentially increased long‐term returns. This new “customer capitalism” model should be implemented immediately. It replaces the older capitalism model based on producing and distributing more. Customers are now more knowledgeable, want to participate more, and demand more than ever before.
The old model produced profits, but never gave customers the long‐term value they wanted, thus could never produce enduring competitive advantages. The keys to the old model were products and services. They reduced strategies to differentiation and/or price, which were easy to copy and offered consumers little reason to be loyal.
Customer capitalism on the other hand, aims to identify new “market spaces” and transform a business so customers “lock on” to you as their ongoing choice, hopefully for a lifetime. This is achieved by giving customers an enhanced experience, especially by using intangible resources, such as ideas, knowledge, and information. These high “value” currencies allow businesses to create deeper, stronger relationships with “locked on” customers. Quality long‐term cash flows are then generated which allow the cycle to begin again and again, with each cycle offering greater returns. Older capitalism models measured success with static indicators like customer satisfaction, retention, market share, stock price, etc. Therefore, they told us more about past practices than about a business’ ability to exploit future opportunities.
The ten principles of customer capitalism are as follows:
- 1.
(1) The aim of the enterprise is to fundamentally transform itself by proactively seeking to create new markets.
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(2) Leaders identify new ways to do things.
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(3) Innovation involves creating for and with customers.
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(4) Every customer is an investment opportunity, and thus has a time value. The goal is to maximize the time value of customers. This is best achieved by investing resources (time, money, energy, etc.), to build the relational, intellectual, and infrastructural assets needed to gain long‐term, exponential customer rewards.
- 5.
(5) Dominating “market spaces” achieves the time value of customers. “Market space” is dynamic, describing results a customer desires now and in the future. Typical capitalism models are still myopic in describing markets like cars, loans, personal computers, medical, etc. The “customer capitalism” model views these “market spaces” as personal mobility, lifetime event cash managing, global networking capability, and total well being/quality life extension.
- 6.
(6) Value is created by linking benefits into an integrated superior customer experience throughout an entire activity cycle.
- 7.
(7) Individuals form a customer base that becomes ever increasing and ever profitable. “Customer capitalism” posits customers have personal preferences. Marketers must understand their needs, cultivate their business, cater to them, and treat them as a lifetime customer not as a transactional purchaser who comes and goes. Satisfying these customers creates an installed loyal customer base, and the enterprise becomes their principal choice on an ongoing basis. Marketers should continue innovating to offer customers personalized attention and items that meet their evolving unique multiple needs.
- 8.
(8) “Enterprise spaces” are the new units of competition with win‐win the goal for all contributors. Traditional capitalism competes via companies, industries, countries, etc. They provide convenient scorecards for businesses, but offer little to customers who prefer keeping score on the values (results) they are seeking. These results best occur across companies, industries and countries when people work together and share resources and responsibilities. Then the focus can really be on customers having integrated, satisfying experiences.
- 9.
(9) An integrated customer experience is achieved through emphasizing intangible resources such as ideas, knowledge, and information. These intangible resources offer high value to customers and improve and/or grow the more they are utilized, as opposed to items which use up limited, valuable resources. “Customer capitalism”, by emphasizing intangible resources, offers new economies of scale such as skill, stretch, sweep, and spread.
- 10.
(10) “Customer capitalism” oriented companies compete long term for customers and are evaluated on their results in developing sustained advantages with customers and on long‐term potential for growth.
Once these ten principles drive strategy, six reinforcing positive loops based on the law of increasing return generate exponential opportunities:
- 1.
(1) Loop 1: relationships. The more relationships with customers improve because buyers received superior value, the more the relationships are reinforced, the more the customer spends.
- 2.
(2) Loop 2: intangibles. The more dominant intangibles are in company offerings, the more they grow, the more they enhance the offerings, continually increasing their use/reuse and value.
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(3) Loop 3: networks. The more people and equipment are connected to an infrastructure creating superior customer offerings, the more attractive these networks are to even more customers which further increases their value.
- 4.
(4) Loop 4: players. The more players that there are supporting offerings to customers, the better the linked benefits and integrated customer experience, which attracts more customers, who spend more, drawing in more players.
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(5) Loop 5: developers. The more developers create upgrades, applications, and new innovation, the more customers experience enhanced satisfaction, the more customers spend, causing new upgrades, applications, and innovation.
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(6) Loop 6: costs. The more relationships with customers are strengthened, and the more resources between players, developers, and networks are shared, then the more that intangible resources flow between them, the more these resources are used/reused and the more costs go down.
The more these positive reinforcing loops add to increasing returns, the more these returns exponentially increase, thus attracting more players, developers, and networks, thus leading to even more success.
Amazon.com is a great example of applying “customer capitalism”. They asked:
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How can we provide superior book and service offerings to customers, thus continually building relationships resulting in greater customer spending?
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How can we improve the infrastructure through networking, thus adding customers, increasing network value, and escalating customer spending?
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How can we share intangibles to deliver improved offerings, attract more customers/increase customer spending, increase the intangible value even more, and decrease the costs?
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How can we get more players involved to improve linked benefits, thus adding to offering value, attracting more customers and more players, and adding more value?
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How can we attract developer assets to enhance offerings, thus attracting more customers/spending, leading to more innovation?
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How, by achieving results from success relating to the above actions, can we continue to lower costs?
Finding answers to these questions allowed Amazon.com to think creatively and revolutionize the marketing of books and so much more. They located “new market spaces”, linked added benefits, especially emphasizing intangible resources into an enhanced customer experience, increased their loyal customer base and their spending, integrated new “enterprise spaces”, lowered costs, increased profits, and converted retailing books and so much more into global industries. This one example alone illustrates how important this new strategy paradigm is, what a dramatic breakthrough it presents, and how quickly business as usual is no longer enough to ensure long‐term success.