Last week I attended the DAA (Digital Analytics Association) Philadelphia Symposium at the University of Pennsylvania. The concluding talk was by Wharton Professor Peter Fader entitled “How Can Customer Centricity Be Profitable?” The idea is that not all customers are the same and we often try to lump them together to make things more organized for us – but in turn, leaving lots of profits untapped:
“The way I see things-and the way I want you to start seeing things-is that not all customers are created equal. Not all customers deserve your company’s best efforts. And despite what that tired old adage says, the customer is most definitely not always right. Because in the world of customer centricity, there are good customers… and then there is everyone else.”
“Customer centricity is about identifying your most valuable customers – and then doing everything in your power to make as much money from them as possible and to find more customers like them.” from Customer Centricity: Focus on the Right Customers for Strategic Advantage
Often marketing budgets are spent exclusively on getting MORE customers. Like Goldilocks, Fader divides new customers into three groups:
- Too Cold. Research shows that there is a natural and immediately trailing off of new customers. Maybe they were incented by a sale, or cashed in a Groupon, or succumbed to an impulse purchase. They quickly lose interest and drift away. Fader argues that you should just let natural selection do its thing. Don’t bother spending marketing money and effort on getting back these people.
- Too Hot. Then there is a group of diehard groupies that will stick around no matter what. Perhaps they are creatures of habit, or tied to your company in many ways, or have a deep personal connection. Of course you want to recognize and value these customers, but do you really need to spend a lot of marketing time and money here?
- Just Right. This is the group that may be on the fence. They see value in your company but need to be convinced. Here is where you want to focus your efforts for growth.
With a customer centric approach you know what YOUR customers want and where to find them. You also know what they are worth (customer lifetime value) so you can spend your marketing dollars efficiently. Want to learn more on how you can identify and attract better customers? Click here to listen to the webinar “The Secret of Getting Better Customers” and download the Better Customer tools and templates here.