Many a company leader acknowledges the importance of knowing your customers. But few can claim to have got close to that goal, says Mallen Baker

How hard do you try to understand what your stakeholders think, what they want you to do? No, really. How close do you think you’re getting?

From the companies I speak to, I would say that about a half know full well they do almost nothing to really understand their stakeholders. They think it’s important in a “we’ll get around to it one day soon” kind of a way.

The other half have taken some measures – questionnaires usually – to get some feedback on what stakeholders think. Maybe they have a stakeholder engagement panel with a few worthies on it. Maybe they’ve commissioned someone to phone a bunch of “CSR experts” as part of that all-important “opinion former” group.

And they think they’ve got most of what they need. Lazy, lazy, lazy.

I like to draw the parallel between the methods used to allegedly understand stakeholders and those used by marketers to seek to understand customers.

And let’s make it topically fascinating by including into the mix the recent much-discussed decline in the fortunes of Tesco – one of the previously unquestionable masters of building success by understanding customers.

How did Tesco become so successful? It was the first in the UK to understand that the use of loyalty cards wasn’t about enticing people to spend more money with a few meagre incentives, but was about collecting information about what real people did, in-store, day-in day-out, in their millions.

Tesco analysed the data to categorise a number of highly nuanced profile-based groups of consumers. Once the company could place you into one of those groups, it had all kinds of insights that would enable it to predict what sort of promotions would work with you, and what sort of products you would be tempted to buy even if you’d never bought them before from Tesco.

If that’s been so effective, when did it stop working? Why is Tesco now in the doldrums?

Well, it didn’t stop working. Tesco still dwarfs the competition, and the fact is that its growth had to plateau at some point.

But there is nevertheless a backlash against Tesco. It tends to focus on the customer impression that the stores are shabby, that the understaffing leads to longer waits at the checkouts – a reduced focus on quality of customer experience.

Tesco became too focused on the science of manipulating customer data to provide insights on how people behave. It lost sight of some of the other fundamentals of the relationship between company and customer. The in-store experience was an absolutely key one.

They don’t know everything

I always marvelled at how Tesco, which celebrated its mastery of understanding the customer, went so badly wrong when it first launched Fresh & Easy in the US. It did extensive research. It visited customers in their homes and looked to see what was in their fridge.

Later on, the company admitted it had got it wrong. The Brits in charged looked to see what was in the fridges, but they didn’t think to look at the deep freezer cabinets.

So those of us who don’t want to think the marketers completely own us still have something to cling to. But there are still some lessons here for corporate responsibility and stakeholder engagement.

First, marketers are only tracking one aspect of their customers’ lives: the aspect that affects the way they behave when they come to make shopping decisions. And yet they learned long ago that simply asking customers what they wanted was not an effective way of really getting the insights they needed.

The factors that affect stakeholders’ relationships with companies are more subtle, and can be affected by practical matters, tribal loyalties, and generalised hopes and fears for the future. And yet asking what they want remains the state of the art.

Second, things that worked for a while can stop working because something to which nobody is paying attention suddenly becomes important. You think you have good stakeholder relations now. Great, if you’re not kidding yourself. But this is like getting fit by going to the gym. You only stay fit by constantly challenging yourself by pushing yourself harder every time you visit.

Thirdly, marketers came to understand through tracking this kind of data just how incredibly important habits are. People, although they give the semblance of having free will, and making hundreds of decisions every day, really only act within a fairly prescribed number of habits that are familiar and provide rewards to them.

Want to understand your stakeholders? If you don’t understand their habits then you certainly won’t achieve the goal. And particularly if you want to recruit them to changing the way they consume or to give you permission to make your product more sustainable, you need to know why they do what they do.

Mallen Baker is founder of Business Respect and a contributing editor to Ethical Corporation.