Dr. Peter Fader had a question for attendees of his session, “How Can Customer-Centricity Be Profitable?,” this morning at Agility Summit 2013: If you had an extra dollar to spend on your business, where would you invest it?
The traditional mindset on how to grow a business, he explained, has most companies overspending on customer retention and development, while under-spending on customer acquisition as they focus on what it costs to get a customer versus what each customer is ultimately worth.
“That conventional wisdom made sense in a product-centric world when a) we were focused on blockbuster products, and b) we didn’t have the data to really tell who were the good customers versus the not-so-good,” said Fader, professor at The Wharton School, University of Pennsylvania, and co-director of the Wharton Customer Analytics Initiative.
Sharing some of the lessons from his game-changing book, “Customer Centricity: Focus on the Right Customers for Strategic Advantage,” Fader offered up great insights on how to adopt customer-centric strategies that will help you grow your business: •
• Stop treating all customers the same. They don’t all hold the same value to your company, at the point of acquisition or over time. Figure out who are your valuable customers, and then build the business around them.
• Customer-centricity is not about coming up with the next big thing, which is a product-centric mindset, but about finding the next big customers. You don’t necessarily create valuable customers, so much as you discover them.
• Trying to grow middling customers into more profitable relationships has its place in business, but it’s difficult work. It’s far more efficient to test and learn to figure out who the valuable customers are much more so than to trying to transform the unprofitable customers into profitable ones.
• For most companies, there is already a tremendous amount of low-hanging fruit that will provide a true sustainable competitive advantage. When you leverage data to figure out what makes the really valuable customers different from the less valuable ones and then adjust your business strategy accordingly, no competitor can knock that off.
• Get more comfortable with the data as well as the tools that exist to help you make sense of all the information customers are sharing with you. Companies now have the capability to tell not only which customers have been profitable in the past, but which ones will be valuable to your business in the future. And by basing your future acquisition efforts on this insight, you can double your business.
So, where are you going to spend your next marketing dollar?