Do Business Well

Where have all the customers gone? If the bad news is that your competitors have got them, the good news is that you can win them back or attract new ones.

As we have emphasized, the starkest challenge facing business today is customer scarcity: too many sellers for too few buyers.

In our democratized marketplace, practically anyone can participate in the competitive fray, and to harried managers it sometimes seems that practically everyone has. The result is that despite the fact that customers are more plentiful and richer than ever, each of them is being pursued by more suppliers than ever before. In addition to their traditional rivals, managers face new competitors that have transcended industry boundaries or erupted from the Internet with a new concept that threatens whole lines of existing products. And with the rise in the number and quality of suppliers, it’s no longer production that is the bottleneck to growth. It’s consumption.

Do you remember when high productivity was the grail we all pursued but never quite grasped? Computers changed all that and transformed business almost overnight. Yet today’s huge leaps in productivity have created a classic unintended consequence—a mounting excess of goods and services that clogs warehouses, offends customers, and looks very much like a glut. There is simply too much of everything for customers to absorb—undigested information, miraculous new gadgets, or imitations of existing products.

From a manager’s viewpoint, the change has been swift and scary. In just a few years, customers in nearly every field have metamorphosed from dependable, pliant shoppers to elusive, picky know-it-alls who tell you precisely what they want, how and when they want it, and how much they will pay for it. And if for some reason you are unable to gratify them, off they go to find someone who will.

The supply glut and the customer shortage—two sides of the same coin—are a problem that feeds on itself. Striving to attract elusive customers, manufacturers nervously churn out more versions of the same products, as if slicing a salami thinner and thinner. But so many choices can be overwhelming to customers; they create paralysis or resistance, while pouring infinitely more goods into the already flooded market.

Consider:

The typical telephone customer in the United States gets three monthly bills from three different service providers, while at the same time he or she fends off sales pitches from three or four others. What the telemarketers are trying to sell is the convenience of combining three bills in one. What they ignore is the real nuisance—uninvited interruptions.

Between 1987 and 1997, the number of U.S. mutual funds mushroomed from two thousand to twelve thousand. As an investor, how can you really tell the difference between one fund and the next? Wouldn’t it be much easier to compare several individual stocks instead of trying to make sense of all these funds?

The 24×7x365 buzz is reaching a fevered pitch. “We need to provide customers access around the clock” is the latest mantra in many service organizations. “That way we won’t lose a sale.” Never mind that the bulk of our local customers are asleep at 3:00 A.M.

To compound all this mischief, many of our most productive companies are pouring out new products in response to hunches, fads, a competitor’s new offering, or merely the fact that technology makes it possible, rather than in response to a genuine sense of what customers want. The end result is a vicious spiral of dwindling profit margins, fragmented markets, and still more competition for ever-scarcer customers.

I often hear managers who are trapped in this cycle fretting about the massive investments they must continually make in technology and new product development, and the impact all this is havin^g on their companies and themselves. “It just feels as if we’re all working twice as hard as before just to get the same results,” one senior manager told me. “Are we really better off than we were ten years ago?” The answer is yes, but only for those who can turn danger into opportunity and thus win the battle for scarce customers.

Still, a few organizations—such as Carnival Corporation, Cisco Systems, Sony, and Paychex—are inhaling new customers like a great white shark in a feeding frenzy. They are wallowing in customers. What is the winners’ secret? In essence, what they share is a thorough understanding of six new realities, which are unusual in that they are causes and effects of customer scarcity. The new realities are:

• Competitors proliferate.
• All secrets are open secrets.
• Innovation is universal.
• Information overwhelms and depreciates.
• Easy growth makes hard times. Customers have less time than ever.

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