More companies – both large and small – are talking about customer centricity as a new management framework that allows them to build stronger (and more profitable) relationships with customers by better understanding their behaviors and anticipating their needs. But firms have different perspectives about what customer centricity really means, and how to best implement it. So, what do product leaders need to know about this emerging strategic perspective? The Wharton School Professor of Marketing Peter Fader shares insights on the nature of customer centricity and key factors in implementing it successfully.
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On which customers to love
Realistically, not all customers are valuable. Customer centricity is all about focusing on the customers that add value to your business. This is what Peter had to say about which customers to love:
“You can’t love all your customers. You can’t be every customer’s best friend. You just can’t. Even if you tried, it would be incredibly expensive, incredibly inefficient, and the ROI would be pathetic.”
“Too many companies live under the mythology that they can acquire as many customers as possible as cheaply as possible, and then they will educate and transform them. We will turn those ugly ducklings into beautiful swans. But you know what? It can’t do that. A tiger can’t change its stripes.
“At the same time, you don’t want to aim right down the middle at the average customer. Because there is no average customer, the customers are wildly different from each other.”
On customer centricity
Customer centricity is about putting the customer at the center of everything you do. But not every customer. It’s important to know which customers will become the center of your product journey. Here is what customer centricity is all about:
“Instead of putting the product at the center of what we do, and then finding people who are willing to buy it, we’re going to put those valuable customers at the center of everything we do. Then we’re going to turn around and say, “hey, r&d people, we got these awesome customers over here, can you come up with something for them?”
“It is not that we are centered around every single customer. It is the question of which customers we are centered around. Which customers should be the focus of our existence.”
“Customer centricity is a strategy that aligns a company’s development/delivery of its products/services around the current and future needs of a select set of customers in order to maximize their long-term financial value to the firm.”
“Not all customers are created equal. We’re gonna do awesome things. We’re gonna do awesome things for awesome people.”
On customer lifetime value
Customer lifetime value allows you to maximize the value of every customer relationship. You can provide a better customer experience that keeps people around for longer, while also helping improve the quality of your products and services. Here is how CLV relates to customer centricity:
“Most of the customers aren’t that valuable. The vast majority of customers aren’t that valuable. Just a small number of your customers carry a disproportionate amount of value. So you look at that green bar. Those are the really valuable ones. Those are the focal ones, the ones that are going to be centered around.”
“How do they use and talk about our products and services differently than everybody else? What makes them different? In what ways can we work with them and do things for them to make them even more valuable? And how do we acquire more customers like them?”
“Sometimes we go beyond transactions to incorporate other relevant factors; e.g., referrals, usage patterns, responsiveness to relationship-building efforts. For instance, in pharmaceuticals, we may also account for adherence, compliance, and other measures of therapeutic responsiveness (and quality of life) as well.”
On key takeaways on customer centricity
- Celebrate heterogeneity
- Choose performance metrics, incentive schemes, and organizational structures that properly reflect/support them.
- Be clear about what customer centricity is (and isn’t)
- It’s not about “super duper customer service” for everyone
- Spread the gospel
- Make sure that external stakeholders and channel partners are aware of (and aligned with) the strategy
- Customer centricity isn’t necessarily the best strategy for every firm
- An industry with a mix of strategies is often the healthiest