The Resolution

To truly know your customers you have to be one

As a non-executive director, you’re often on different boards, and this can make it challenging to really understand what the consumer in each business is going through. The only way to understand what they experience is to walk a mile in their footsteps.

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So many organisations talk about the importance of being customer first and improving customer satisfaction, but many are just verbalising what they think their audience wants to hear. If you’re genuine, then every board member needs to challenge themselves to really understand their consumer. The only way to do this is to actually be a customer.

Get out of your comfort zone

It’s challenging for many people who sit on boards to put themselves in the shoes of their customers. While most have done well in business, how many really understand what the average Australian is going through? How many really understand what it's like to make decisions about what to cut back on if you have to pay more for your electricity and gas? How many have stepped into an Aldi or a Kmart to understand how people make decisions to shop at low-price retailers?

To be effective, non-executive directors have to spend time at the coalface. If you're on the board of a retailing company then go and shop at a store. Don’t just go on a board visit, go in as a customer and listen to what the customers and staff are saying. This experience gives you an unparalleled insight into what your consumers are thinking about and debating before they actually purchase something from your business.

When I was CEO of Target, I used to shop in our stores every Saturday. While some people did recognise me, most didn’t know who I was so I could stroll into different stores like any other customer. I would try to position myself near customers as they were looking at products. If a husband and wife were looking at the towel wall, I’d stand close enough so I could hear them saying “well, there isn’t a good range of colours” or “they are too expensive.” This would give me an understanding of what they really thought of our products and store experience.

Walk a mile in your customer’s shoes

If your products aren’t good enough for you to purchase then they generally won’t be good enough for your customers either. That’s why, as CEO of Target, the towels in my home were from Target and my daughters were dressed by Target. This gave me a true understanding of what our customers went through. It also helped me identify real issues that needed to be addressed.

Once I was purchasing underwear for my girls and I couldn't find the correct sizes - there were plenty of larger sizes but nothing for smaller children. I started talking to a customer who told me that this store never had the right sizes.

On Monday, I requested an analysis on children’s sizes. This revealed that stores located in neighbourhoods with a large resident Asian population ran out of small sizes quickly because their customers were often petite, while other locations ran out of larger sizes. Our distribution of sizes had not been adapted to match our customer demographics. This important issue had never been picked up before, but it was core to understanding our customer. The only reason I detected the issue was because I was actually a customer.

Even if you’re not in retail, your customers are potentially everywhere. Recently, I was taking a taxi and I started to have a discussion with my driver about electricity costs. I was amazed by how agitated he was about it, and it gave me a real understanding of how these price rises are affecting Mr and Mrs Australia. These insights would be invaluable to a non-executive director of a utility company.

At Super Retail Group, we take the approach of ensuring that the CEO is not the only one talking to the board. His direct reports and their teams attend board meetings periodically so we can do a deep dive into their businesses. For example, the CEO of Rebel Sports came and explained her vision for the future and how she sees a new store format playing out. We then go with the team into stores so they can show us what their vision is.

After this, I often go back to the store on my own and talk to the shop assistants. They don’t have a clue who I am, but it's amazing what they will tell you. I ask pointed questions so that I can understand the business from the customer’s point of view. “What's selling and what isn’t?” “What would you do if you owned this store?” “Do you have size or colour issues?” This gives me insights into what’s happening in the business so that we can improve our customer’s shopping experience.

Decision making isn’t always rational

As a director we often make decisions based on the facts at hand, but our customers aren’t always rational. While most organisations will use focus groups, these don’t give you the same intelligence as actually seeing it for yourself. People in focus groups may tell you what they would do, but they rarely say what they actually end up doing.

This was a lesson that I learned the hard way in my early days at Target. A new Harry Potter video was the hottest item in town and all the discount retailers were selling it below cost. I vetoed the decision to discount it because I didn’t want to lose $2 on each sale and $200,000 in three days, so we sold it at cost instead. At the time, the operations leader told me this was a mistake but I didn’t pay sufficient attention to his argument.

On the Saturday morning I visited Target in Chadstone and saw a family of five looking at the Harry Potter display. Catalogue in hand the mother said “You know it’s $2 cheaper at Kmart.” So they walked out of Target, across the complex to Kmart. They then picked up the DVD, wandered past the lolly counter buying some on passing and one daughter then remembered she needed some stationary for school. By the time they got to the checkout they had spent about $70 - all for the sake of saving $2. Target missed out on $68 because I tried to save $2. Needless to say, we didn’t make the same mistake on the next Harry Potter DVD.

As a non-executive director, you’re often on different boards, and this can make it challenging to really understand what the consumer in each business is going through. The only way to understand what they experience is to walk a mile in their footsteps.

To be a great director you go wherever your consumers are and talk to them in their own environment, hear what they’re saying and understand the challenges they are facing. Ultimately, it’s impossible to be a true custodian of shareholder wealth unless you have deep empathy for the end customers of the business.