Customer Centricity: How EA Turned Around Its Business by Leveraging Customer Data and Analytics - A Case Study
Customer Centricity: What It Is, Why It Matters, and How to Achieve It
Customer centricity is a business strategy that focuses on creating a positive experience for the customers by understanding their needs, preferences, and values, and delivering products and services that meet or exceed their expectations. Customer centricity is not just about providing good customer service or satisfaction; it is about building long-term relationships with the customers and maximizing their lifetime value for the business.
customer centricity fader pdf 23
In today's competitive and dynamic market, customer centricity is more important than ever. Customers have more choices, more information, and more power than before. They can easily switch to another brand or provider if they are not happy with their current one. They can also share their opinions and feedback with other potential customers through social media and online reviews. Therefore, businesses need to adopt a customer-centric approach to attract, retain, and grow their customer base.
But how can businesses become more customer-centric? How can they measure their level of customer centricity? And what are the benefits of customer centricity for both the customers and the businesses? In this article, we will answer these questions by exploring the customer centricity framework developed by Peter Fader, a professor of marketing at the Wharton School of the University of Pennsylvania. We will also provide some practical tips on how to implement customer centricity in your organization.
Customer Centricity Framework by Peter Fader
Peter Fader is one of the leading experts on customer centricity. He has written several books and articles on the topic, such as Customer Centricity: Focus on the Right Customers for Strategic Advantage and The Customer Centricity Playbook: Implement a Winning Strategy Driven by Customer Lifetime Value. He has also created a free online course on Coursera called Customer Centricity: The Ultimate Marketing Strategy, where he explains his framework in detail.
According to Fader, customer centricity is based on four pillars: customer heterogeneity, customer lifetime value, customer equity, and customer relationship management. Let's take a closer look at each of these pillars.
The four pillars of customer centricity
The first pillar of customer centricity is customer heterogeneity. This means that not all customers are the same; they have different characteristics, preferences, behaviors, and needs. Therefore, businesses should not treat them as a homogeneous group or assume that they all want the same thing. Instead, businesses should recognize and appreciate the diversity of their customers and try to understand what makes them unique.
Customer lifetime value
The second pillar of customer centricity is customer lifetime value (CLV). This is a metric that estimates the present value of the future cash flows that a customer will generate for the business over their entire relationship. CLV is a key indicator of how valuable a customer is for the business, and how much the business should invest in acquiring, retaining, and growing them. CLV can vary significantly across different customers, depending on factors such as purchase frequency, order size, retention rate, and profit margin. Therefore, businesses should not use average or aggregate measures of customer value, but rather calculate and track the CLV of each individual customer.
The third pillar of customer centricity is customer equity. This is the total value of all the customers that a business has or expects to have in the future. Customer equity is a measure of the long-term health and performance of the business, and how well it is creating value for its customers. Customer equity can be increased by acquiring more customers, increasing the CLV of existing customers, or reducing the cost of serving customers. Customer equity can also be used to evaluate the effectiveness of different marketing strategies and tactics, such as pricing, promotion, product development, and distribution.
Customer relationship management
The fourth pillar of customer centricity is customer relationship management (CRM). This is the process of managing the interactions and relationships between the business and its customers across various channels and touchpoints. CRM involves collecting and analyzing customer data, such as demographics, preferences, behavior, feedback, and satisfaction. CRM also involves using this data to segment customers based on their value and behavior, and to tailor products, services, and marketing to each segment. CRM aims to enhance customer loyalty, retention, satisfaction, and advocacy, and to optimize customer lifetime value and equity.
The benefits of customer centricity for businesses
By adopting a customer-centric approach based on these four pillars, businesses can enjoy several benefits, such as:
Increased customer loyalty and retention
Customer centricity helps businesses to build stronger and longer-lasting relationships with their customers by providing them with personalized and relevant products and services that meet or exceed their expectations. This leads to higher customer satisfaction, trust, and loyalty, which in turn reduces customer churn and increases retention rates.
Improved customer satisfaction and advocacy
Customer centricity also helps businesses to improve customer satisfaction and advocacy by delivering positive and consistent experiences across all touchpoints and channels. This leads to higher customer satisfaction scores, net promoter scores, and word-of-mouth referrals, which in turn enhances the reputation and brand image of the business.
Enhanced profitability and growth
Customer centricity also helps businesses to enhance profitability and growth by focusing on the most valuable customers and maximizing their lifetime value. This leads to higher revenues, margins, and profits, as well as lower acquisition and retention costs. Customer centricity also enables businesses to identify new opportunities for cross-selling, up-selling, and innovation based on customer insights and feedback.
Competitive advantage and differentiation
Customer centricity also helps businesses to gain competitive advantage and differentiation by creating a unique value proposition for their customers that is hard to replicate by competitors. Customer centricity also helps businesses to adapt to changing customer needs and preferences faster than competitors, and to anticipate future trends and opportunities in the market.
How to Implement Customer Centricity in Your Organization
Now that we have seen what customer centricity is and why it matters, let's look at some practical tips on how to implement it in your organization. Here are some steps you can follow:
Understand your customers and their needs
The first step is to understand who your customers are and what they need from you. You can do this by conducting market research, surveys, interviews, focus groups, or other methods of collecting customer data. You should also monitor your customers' behavior, feedback, complaints, reviews, ratings, etc., using various tools such as web analytics, social media analytics, CRM systems, etc. You should aim to create a comprehensive profile of your customers that includes their demographics, psychographics, preferences, values, motivations, pain points, goals, expectations, etc.
Segment your customers based on their value and behavior
The next step is to segment your customers based on their value and behavior. You can use the CLV metric as a basis for segmentation, as well as other criteria such as purchase frequency, order size, recency, loyalty, engagement, etc. You should aim to create meaningful and actionable segments that reflect the differences and similarities among your customers. You should also assign a name and a persona to each segment more relatable and human. For example, you can segment your customers into categories such as "loyal fans", "high spenders", "bargain hunters", "newcomers", etc.
Tailor your products, services, and marketing to your customer segments
The third step is to tailor your products, services, and marketing to your customer segments. You can do this by creating customized offers, promotions, messages, content, channels, etc., that match the needs, preferences, and values of each segment. You should also use personalization techniques such as using the customer's name, location, history, etc., to make them feel special and valued. You should aim to deliver the right product or service to the right customer at the right time and place.
Align your organization and culture around customer centricity
The fourth step is to align your organization and culture around customer centricity. You can do this by involving all your employees, departments, and stakeholders in the customer-centric strategy and vision. You should also train and empower your employees to deliver excellent customer service and experience. You should also reward and recognize your employees for their customer-centric efforts and achievements. You should aim to create a culture of customer obsession and excellence in your organization.
Summary of the main points
In conclusion, customer centricity is a business strategy that focuses on creating a positive experience for the customers by understanding their needs, preferences, and values, and delivering products and services that meet or exceed their expectations. Customer centricity is based on four pillars: customer heterogeneity, customer lifetime value, customer equity, and customer relationship management. Customer centricity can bring several benefits for businesses, such as increased customer loyalty and retention, improved customer satisfaction and advocacy, enhanced profitability and growth, and competitive advantage and differentiation. To implement customer centricity in your organization, you need to understand your customers and their needs, segment your customers based on their value and behavior, tailor your products, services, and marketing to your customer segments, and align your organization and culture around customer centricity.
Call to action for the readers
If you want to learn more about customer centricity and how to apply it in your business, you can check out the following resources:
Customer Centricity: The Ultimate Marketing Strategy - A free online course by Peter Fader on Coursera.
Customer Centricity: Focus on the Right Customers for Strategic Advantage - A book by Peter Fader that explains the concept and framework of customer centricity.
The Customer Centricity Playbook: Implement a Winning Strategy Driven by Customer Lifetime Value - A book by Peter Fader and Sarah Toms that provides practical tips and tools for implementing customer centricity in your organization.
We hope you enjoyed this article and found it useful. If you have any questions or feedback, please feel free to leave a comment below. Thank you for reading!
Here are some frequently asked questions about customer centricity:
What is the difference between customer centricity and customer orientation?
Customer orientation is a general attitude or mindset that puts the customer first and considers their needs and expectations. Customer centricity is a specific strategy or approach that focuses on creating value for the most valuable customers based on their lifetime value.
What are some examples of customer-centric companies?
Some examples of customer-centric companies are Amazon, Netflix, Starbucks, Apple, Zappos, and Nordstrom. These companies are known for their exceptional customer service, personalization, innovation, and loyalty programs.
How can I calculate the CLV of my customers?
There are different methods and formulas for calculating the CLV of your customers, depending on the type and complexity of your business and data. One of the simplest and most common methods is to use the following formula: CLV = Average Order Value x Purchase Frequency x Customer Lifespan You can also use online calculators or tools such as CLV Calculator
or HubSpot's Customer Lifetime Value Calculator
to estimate the CLV of your customers.
How can I segment my customers based on their value and behavior?
There are different methods and criteria for segmenting your customers based on their value and behavior, depending on the type and complexity of your business and data. One of the most popular and effective methods is to use the RFM model, which stands for Recency, Frequency, and Monetary Value. This model segments your customers based on how recently, how frequently, and how much they have purchased from you. You can also use online tools such as Optimove's RFM Segmentation Tool
or Putler's RFM Analysis Tool
to segment your customers using the RFM model.
How can I tailor my products, services, and marketing to my customer segments?
There are different ways and techniques for tailoring your products, services, and marketing to your customer segments, depending on the type and complexity of your business and data. Some of the common ways and techniques are: - Using customer personas to create personalized and relevant messages, content, and offers for each segment. - Using email marketing, social media marketing, or other channels to communicate and engage with each segment based on their preferences and behavior. - Using A/B testing, multivariate testing, or other methods to optimize and improve your products, services, and marketing for each segment based on their feedback and results. - Using loyalty programs, rewards, discounts, or other incentives to encourage repeat purchases and referrals from each segment.