When Peter Fader and Sarah Toms wrote a book called The Customer Centricity Playbook, people tended to read the title and assume that it was about putting customers at the center of business decisions, along with some iteration of “the customer is always right.” That is not what the book is about. In this Talk at Google, Fader and Toms explore the concept of the “good customer,” customer heterogeneity, and customer lifetime value, while also explaining four principles of customer centricity and a call for a radical change in metrics for corporate valuation.
Customer centricity means focusing on increasing the value of your customer base.
Traditional business simulation games encourage people to think in terms of the product, how much it will cost to produce, and how they’ll market the product in the future. The customer centricity playbook teaches companies to focus instead on growing the profitability of the customer base.
Companies would benefit from recognizing that their customers aren’t created equal. There’s a great diversity among a single company’s customers if you look closely, and it’s helpful to analyze which customers are most valuable. Customer-centric companies follow four principles to develop winning strategies: They recognize “customer heterogeneity over the average customer,” they embrace “cross-functional uses of CLV over siloed applications,” they focus on “metrics that reflect customer equity over volume and cost obsession,” and they provide “clear communications with external stakeholders over misalignment and misunderstanding.”
Your customers don’t fall in a normal distribution. Strive to recognize “customer heterogeneity...
Peter Fader is a professor of marketing at the Wharton School of the University of Pennsylvania, and Sarah E. Toms is the executive director and co-founder of Wharton Interactive. Together, Fader and Toms co-authored The Customer Centricity Playbook.