How Companies Fail, and Why the Customer Always Wins in the End

There are two ways for a business to be successful in the short term.

Option 1 is to do anything you can to generate revenue. Sometimes it’s something small like sending that one extra promotional email — it will get unsubscribes, sure, but at least it will push your numbers up this quarter. Or it might be something huge like holding a monopoly position in the marketplace. It could even be slowly making the product just a little bit worse to boost margins.

Option 2 is to relentlessly serve customers better than your competitors. Those are the case studies and stories we share on MarketingSherpa. Likewise, you see this in Zappos walking away from drop shipping, even though it produced 25% of its revenue. Or Optum reorganizing its marketing team around educating the customer, instead of one-and-done marketing techniques that attempted to generate leads but didn’t serve the customer.

And, frankly, most companies are a combination of the two. But every day, with every decision you make as a marketer, you decide where on the spectrum your company lies. Will you push your company closer to the customer or farther away?
Of course, if it was easy, everyone would be doing it. Let’s take a look at why customer-first marketing is so important, and why it’s so hard.

Short-term success masks long-term failure

Dr. Martin Luther King, Jr. famously said, “The arc of the moral universe is long, but it bends towards justice.”

I think we as marketers can learn a lot from this quote, and I would respectfully amend it for our industry to, “The arc of business success is long, but it bends towards the customer.”

Because if the decisions we make in the short term come at the expense of the customer, they ultimately come at the expense of the company. Let’s take a look at a few examples of these mistakes.

Mistake #1: Forgetting who the real customer is

The idea for this blog post came to me when a foreign colleague came into my office and asked, “What is going on with your elections?”

This isn’t a political blog, and I’m certainly not here to endorse any candidate, but most unbiased observers would agree this has been a surprising election year. As of the writing of this blog post, outsider candidates have either challenged the establishment favorite to a surprising degree (Bernie Sanders) or even appear to be the likely winner of the nomination (Donald Trump).

An ocean of op-ed ink has been spilled as to why this is the case. And while there are many reasons, from a marketer’s perspective, I’d argue the most important one we can learn from is this — the political industry had forgotten who the real customer is.

Political consultants and politicians focused on pleasing major donors. And thanks to the success of traditional interruption-based advertising, as long as candidates had enough money from those donors, they would win. Since voters perceived they had no other viable choice, they kept voting for the least bad option even though they were visibly sick of this game.

And then — all of that pent up anger exploded in this election season as candidates were more able to communicate directly with other voters outside of advertising budgets. Like in other industries, interruption-based advertising has lost its effectiveness. In fact, you could argue that Donald Trump’s organic approach defeated the traditional heavy advertising approach even though the traditional approach had so much money behind it (most notably, Jeb Bush).

At the end of the day, the customer is the voter. And by ignoring the donor class and focusing on the real customer, both Donald Trump and Bernie Sanders have outperformed the industry insiders’ expectations.

And, of course, business does this all the time as well. Whether it’s prioritizing distribution or resale partners, the press, industry insiders, the company’s own executives or Wall Street.

Twitter is an example of a company currently faced with this tradeoff. In order to meet Wall Street analysts’ growth expectations, it has added new features, like an algorithm that affects which tweets users see, and floated other controversial ideas, like expanding tweet length from 140 characters to 10,000. These changes could strike at the very core of Twitter’s value proposition, and alienate its real customers in an attempt to please the Street.

Mistake #2: Arrogance

I used to have a home phone from BellSouth. Why? Because I had no other choice. But the moment an option opened up, I switched to VOIP. Because I never perceived that BellSouth put me first.

BellSouth was a monopoly. As Lily Tomlin, as her character Ernestine the phone operator, put it in her classic parody of the phone company: “Why don’t you try using two Dixie cups with a piece of string?” The tagline for that parody sums it up well — “We don’t care. We don’t have to.”

Being a monopoly isn’t the only reason companies get arrogant. Technological dominance is another great example. QuarkXPress used to be the dominant publishing platform, with 95% market share. But Quark neglected its customers.

For example, when Xpress didn’t work well on Mac OS X, Quark’s CEO suggested “The Macintosh platform is shrinking. Switch to something else.” If you’ve ever worked with art directors and graphic designers, you know how passionate they are about their Macs — especially around the turn of the century when Apple was nearly bankrupt and they were one of the few groups using Macs.

Dictating to customers, not serving them, did not work out well for Quark. Customers did switch, though. To Adobe InDesign.

Mistake #3: Getting blinded by your moneymakers

Change is scary. And when you have a vested interest in things not changing, change can be costly.

Of course, it is also inevitable. And the savvy brand can pivot by putting the customer first. Netflix invented the DVD-by-mail business and then competed with that offering by launching less expensive streaming subscriptions.

The Boston Globe competed with its paid digital subscription by launching the free content site. It didn’t pretend free competition was nonexistent. Or try to put up legal barriers. Instead, it learned what customers really wanted, built a business model around it and delivered.

But these examples are the exception. In fact, the great irony is that many companies have been severely damaged by technologies they themselves invented. GM invented the modern electric car before going bankrupt a little over a decade later by focusing on Hummers. Kodak invented the digital camera. And Nokia had a touchscreen phone seven years before the iPhone.

So the downfall of these companies was not from failure of science or technology. But rather, a failure of vision. And a company’s strategic vision lies squarely in the marketing department. These companies were blinded by their current, high-margin products and did not focus on what the customer could benefit most from.

They chose Option 1. Instead of trying to enable a customer choice, they sought to suppress. In a modern-day example, it appears to be the same strategy the electric utility industry is taking with rooftop solar power. It may work in the short term. But a tsunami of customer demand builds up behind this artificial dam that can wipe out brands and entire industries.

Your role in the success or failure of your company

None of these brand-dooming decisions happened overnight. Many happened over years, or even decades.

All fueled by countless small decisions. When given the option to better serve a customer instead of the brand, the self-serving decision was chosen.

Because that is the decision that is easier to justify in a meeting. You can point to numbers in the short term. The few extra sales it generates. The slightly higher margin by giving the customer just a little less.

But what’s harder to measure is that slight loss of trust each and every time the customer is not delighted.

Those thousand small hits to the customer will, over time, cause the dam to burst, and wash away any structural advantage — be it monopolistic, technological, distribution network, patents — your company has.

And as goes the customer, so goes your paycheck.

To remix another favorite quote, this one from George Bernard Shaw: The successful marketer adapts her brand to the customer; the unsuccessful one persists in trying to adapt the customer to his brand. Therefore, all business progress depends on the successful marketer.