The importance of customer satisfaction can’t be overstated

In the beginning of the 1947 movie “Miracle on 34th Street,” Kris Kringle finds himself first playing Santa in the Macy’s Parade and then playing Santa in the toy department of the Macy’s store at W. 34th Street in Manhattan.

To prepare him for his job, Kris is given a list of overstocked toys to “push.” As we might expect, he is a great hit with children and mothers, and he attracts large crowds of shoppers.

It turned out, though, that Kris was not paying any attention to the list of toys that he was supposed to push. Instead, he would find out what a child really wanted and inform the parent where they could find it. And if Macy’s didn’t carry a particular toy, Kris would tell them of another store in New York that had them. Sometimes he would even recommend to a shopper that they could find the toy at Gimbels, which was Macy’s arch-rival for shoppers.

When word leaked out to the press of what the Macy’s Santa (Kris) was doing, there were headlines, and that produced even bigger crowds. The idea of sending a shopper off to Gimbels, though, was too much for Macy’s management to take and Kris was fired. Of course, that made even bigger headlines.

There’s more to the story, of course, but there is no need to spoil a great movie. Something that Kris said to one shopper, though, is particularly important. He had advised her that, “you can get those fire engines at Schoenfeld’s on Lexington.” She had seemed puzzled to be sent to another store but he said, “The only important thing is to make the children happy.”

Fast forward to the present time. Jeff Bezos, the CEO of Amazon, is being interviewed by Charlie Rose on PBS. Rose asks him something about what makes Amazon so successful … what is different about his company? Bezos replies that, “We’re customer-obsessed, not competition-obsessed.”

It would be easy to dismiss Bezos’s words as typical mission statement drivel, just as it is easy to dismiss Kris Kringle’s words as a hackneyed Christmas movie line. But in both cases, we would be mistaken. Both Jeff and Kris believe in and act on those words, and owe much of their enduring success to them. And while the two statements seem different at first, at heart they mean the same thing: focus on customer value.

Jeff Bezos is not Kris Kringle, and it’s a good guess that he knows next to nothing about wrangling reindeer. He has a real business to run, and real responsibilities to employees, stockholders, and customers. But much the success of that business is due to being customer-obsessed instead of competition-obsessed.

A business’s focus is very evident to its workers and to its customers. When management discusses a new marketing tool, for example, does anybody ever ask, “how will this benefit our customers?” And, if the question is asked, does it get an honest answer? All too often a new marketing technique or pricing strategy is being adopted just because “Company X” just came out with it and “we have to meet the competition.”

A recent Dilbert comic strip illustrated the doubtful value of signing up for a company’s customer loyalty program. When Dilbert asks, “Why would I do that,” the salesclerk first says, “If you don’t we’ll overcharge you on your purchases.” And he adds, “… if you sign up we will add a new level of complexity to your life that will make up hate us.”

How does being customer-obsessed affect economics or economic policy? It wouldn’t, if Amazon had not prospered. Its remarkable success in winning and keeping customers, though, is already prompting rumblings that it is “too big” and wields too much power in markets.

In a free market system, economic models are based on the 18th-century idea that Adam Smith used to define markets — that every participant is pursuing his, her, or its own best interest and that interest is reflected in price. A company that is focused on customer value and successful enough to dominate markets presents a very different picture — different enough to affect the economic models. Directly or indirectly it introduces a new variable into the calculations — customer satisfaction — that goes beyond price alone, and previously had not been measured or considered part of economic models that supported policy decisions.

To keep up with this change, economists must be willing to re-examine the fundamentals of economic theory, and find out what happens when they are still there but changed. People and businesses will still pursue their own best interests — but they will be defining that best interest differently.

One thing hasn’t changed since Adam Smith’s time: people lead and economic theory eventually catches up with them.

James McCusker is a Bothell economist, educator and consultant.