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Customer Logic vs Producer Logic

posted 7 Mar 2015, 00:49 by Stuart Jones   [ updated 7 Mar 2015, 00:50 ]
For many years we at The Leading Partnership have been concerned at the dominance of “producer logic” in Australian organisations. This especially comes to the fore in strategy discussions. Producer logic is the rationale that we who produce the product or service know better than our customers and consumers. We are better able to define their needs than they are. This short article argues the opposite!

Most businesses today say they service customers. In reality, they serve themselves.
(From “Frontiers of Management” by Rosabeth Moss Kanter)

All organisations claim to understand the difference between the way customers think and act and the way that they as sellers of services and products think and act.  That is, between Customer Logic and Producer Logic.  It’s easy: customers have unmet needs, we the suppliers come up with products and services to meet those needs at a price.  It’s a virtuous circle and everyone is happy.

However, time and time again when working with our consulting clients we experience a profound and often frustrating inability and unwillingness of both leaders and employees to really understand what their customers want and expect.  Examples abound.  When a customer has an issue with their mobile phone they expect to ring their service provider and have the problem resolved – preferably in one call.  Yet the annual growth in consumer complaints to the telecommunications authorities indicates the opposite. Similarly, surveys consistently show that people want and are prepared to pay for expert customer services when making in-store purchases.  However in the absence of value-adding service, consumers are voting with their feet and migrating to on-line shopping.   Dell Computing creating a whole business model based on this one observation of customer logic.

What is happening?  Why does customer frustration continue to grow?

Customers and suppliers (producers) have fundamentally different world views and consequently, fundamentally different ways of thinking or logic (see table below).  Yet all too often, organisations put the customer at the end of the process of product and service design, marketing and sales, rather than at the centre as their whole reason for being.  We are not saying that companies do this deliberately: It’s just an inevitable consequence of the tendency of companies to focus inwards on what they can control (staff, process, policy, budgets) rather than externally on that which they cannot control (customers and their needs).  The key insight into customer logic is that customers pay for the BENEFITS a product or service brings them. For example: real productivity gains, peace of mind, competitive advantage, safety, enhanced brand or personal prestige to name a few. They don't pay for what the product DOES. Customers are agnostic about what your products do, as opposed to the benefits your products deliver, to the point of complete disinterest. Yet how often are potential customers made to sit through sales pitches that focus on myriad product features without reference to the benefits they want.  As a result there is often a complete mismatch between what the customer is actually buying and what the salesperson thinks they are selling.

Supplier organisations therefore need to create ways for the voice of the customer to be heard and valued.  For this reason, acting as the voice of the customer is a key role for leaders in the new world of mass customisation and customer centricity.

Customer Logic 

Producer Logic 

I pay for the benefits a product or service brings to me – peace of mind from an insurance policy; capacity to beat my competition from new technology, more time with family as a result of hiring a house cleaner.  I define what value is from my perspective. Our job is to come up with new products and services which we then sell on to customers.  We define what value is from our perspective.
I want my needs (known and unknown) to drive the creation of new products and services.  Customers have a role in telling us what they think of the products and services we have already developed and are going to sell to them anyway. Customer needs are hard to understand and work with…
My convenience should come first each and every time I interact with an organisation.  Simplicity should be easy to do.  I don't care if my desire for convenience and simplicity create problems for a supplier or producer.  Efficiency is quite appropriately at the centre of how we structure our organisation and our customer interaction processes.  Simplicity is expensive and often means changing the way we run the company internally.
I am happy for companies to make a good profit as a consequence of delivering benefits that delight me and bring me what I want.  We have to make a profit: it’s our reason for existence. We therefore need to come up with a set of products and services with sustainable margins.