Why Richard Branson is wrong about customer-centricity

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After almost half a century of stirring up the status quo and bringing good cheer to customers in notoriously cheerless markets (trains, banking, cable TV), Virgin revealed recently that they have in fact NEVER put their customers first. 
In an interview with Inc. last year Richard Branson said that Virgin’s famous customer service ethic is not founded on customer-centricity at all, but on employee-centricity. His strategy goes like this: happy employees = happy customers = happy shareholders.

Employees are not the only fruit

Here at Futurelab, while we can’t argue with all that happiness we do humbly take issue with the logic behind it. We’ve always seen employee satisfaction as a key driver in creating positive and profitable customer experiences. Particularly in industries like hospitality and retail, you can’t underplay the importance of carefully recruited, well-trained, well-treated, well-rewarded, impassioned employees. But…. although employee happiness is undeniably one giant juicy factor in customer happiness, it’s not the only fruit; it’s not end-goal. It’s not what CEOs went to bed wishing for on Christmas Eve.

Is a customer-centric store a profitable store?

A recent project with a German retail client has shown us once again – with glorious data to back it all up – the correlation between not only employee satisfaction and customer satisfaction, but between them both and profitability. For years, this client had been scoring remarkably well in general recommendation/Net Promoter® surveys (i.e. “Would you recommend buying from us?”) but they were keen to go beyond general data and target profitability by measuring customer experiences at individual store level (i.e. “Would you recommend buying from us at this particular store?”). 

What makes some stores more successful?

Could it all be down to happy staff, like Sir Virgin says? Could it be simply due to a store’s size, footfall or location? (Spoiler alert: nope). Or is there some other magic formula? To find answers and measure customer experience at store level we ran a pilot of our Retail 360® methodology. In two weeks we did over 1,000 NPS interviews with customers and employees from 26 of their stores. We analysed newly gathered data and consolidated it with existing mystery shopping data and employee satisfaction results. And crucially, we ran each store’s results by their key financial indicators!

Happy staff = happy customers = too simple

We found things that, at Futurelab, we’ve known or suspected for years. With Retail 360 we had granular data to prove it to our client and their store managers:
  • FACT 1: Store size, footfall and location do impact in-store customer experience but are not critical success factors for store profitability. 
  • FACT 2: Our Retail360 data showed that a store’s customer experience has the strongest, most direct correlation with a store’s profitability. 
  • FACT 3: Our data also showed that there was indeed a correlation between employee satisfaction and positive in-store customer experience. 
So no doubt employees have a huge role to play in creating or destroying customer experience, but we think it’s more complicated and more interesting than: happy staff = happy customers. Truly happy, noticeable, motivated staff, those who go above and beyond, don’t exist in isolation; they belong to something bigger, over-arching, all-encompassing, something that, done properly, beats at the heart and bubbles through the veins of a business. And we believe that’s customer-centricity. 
Want to see the full case study? Get in touch with Gitta Grobert ggr@futurelab.net