EMC, Apple and Customer Loyalty Approaches
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I spent much of last week at EMC's annual analyst event, and much of the breaking news this week appears to be on speculation surrounding Apple pulling out of MacWorld.
The problem for Apple is the increasing belief that Steve Jobs will soon be departing the company. At Apple, quality appears to be driven largely from Steve Jobss desk and EMC's CEO, Joe Tucci, appears to have a similar view, but he has tied the result to a quality process that could pass to his successor.
In Apple's case there is a strong belief that much of what Apple now is will be lost when Jobs eventually departs, with board members suggesting in the past that the firm would immediately lose billions in value.
But quality not only defines these two companies, which are vastly different, it likely will play a major role in 2009 as individuals and companies eliminate redundant vendors to contain cost. The vendors more likely to be eliminated are the ones that didn't create and nurture loyalty and thought high quality scores were enough.
Both Jobs and Tucci naturally don't trust quality scores and Apple has historically, and EMC has recently, moved to drive much more aggressively toward building customer loyalty as the primary metric to be measured. That helps both firms focus on what is important to their customers not as others often seem to on things that often seem to only be important to product managers and internal staff.
Because I think it will be a critical differentiator between firms in 2009, let's talk about why quality metrics are crap and why everyone should be focused instead on customer loyalty.
Quality vs. Loyalty
The problem with quality is that it is subjective. Back in the 90s I did surveys on Sony and Dell. Sony by any measure had one of the highest quality products in the market, Dell one of the lowest in terms of breakage rates. Yet, based on customer feedback, you would have thought the opposite were true.
This is because, at the time, Dell had invested in a market leading service and support organization and Sony had not. This meant that Dell touched their customers more often and built relationships with them while Sony didn't touch their customers very often at all and, when they did, the experience was so bad as to almost assure the customer would never buy Sony again.
While people and companies generally don't compare products, they all know the experience they get and they connect the contact with their vendor to their perception of the vendor. If that contact is powerful and positive, regardless of product quality, they build loyalty. If it isn't, regardless of quality, they are likely to stray. Now granted, if the product is truly crap it doesn't matter how good the support organization is, the vendor is going to go broke and the customer is going to move on.
But the lesson here, and this is often very hard for an engineer to understand, is that quality is a perception and the perception of quality can be significantly enhanced or damaged by how well the customer is treated. In fact if you look at much of the difference between a high quality car brand like Lexus and a value brand like Scion you see that the product quality is actually very similar the experience is the differentiator and the Lexus dealership experience is vastly richer than the Scion one. Though both work to increase loyalty in different ways.
Next page: Apple's Approach to Quality