Credit by Peter Fader, Sarah E. Toms
Most brands think they’re customer-centric, but there’s a good chance they’re wrong. Wharton’s Peter Fader and Sarah E. Toms share four common mistakes that prevent companies from acquiring and retaining the highest value customers — and four simple fixes.
If we were to ask you whether your company is customer-centric, you’d no doubt answer with a resounding “yes.” But we think there’s a good chance you’re wrong.
In our decades of teaching and consulting, we’ve noticed that most companies make four mistakes that prevent them from creating and implementing a winning strategy to acquire, develop, and retain their highest value customers — in other words, mistakes that prevent them from truly being customer-centric. Luckily, we’ve also realized that there are four simple fixes that, if implemented, could help companies become more customer-focused and successful.
Mistake 1: You focus too much on “the customer”
As marketers, we’re conditioned to think of customers as kings, to put them — each and every one of them — at the center of our efforts. The result? We end up treating customers as a single, monolithic entity, and we measure our company efforts based on the least satisfied among them. But not all customers are created equal. The fact is, no matter how much time, money, and resources you throw at some people, they will always remain somewhat indifferent to your products or brand.
Fix 1: Celebrate customer heterogeneity
Fixing this mistake starts with a mindset shift: you need to accept that there is a hierarchy of customers and some are far more valuable than others. Once you’ve made that mindset shift, you can start doing two important things.
First you can get better at identifying where your existing customers fall on the spectrum, from highest to lowest value. We have so much data at our fingertips about our customers that there’s no excuse for not being more nuanced in our handling of the information about them. Armed with these insights, you can then start tailoring how your company interacts with them. Should someone who bought something from you months ago and hasn’t engaged since get the same attention as your most loyal customers? Absolutely not. If your customers are heterogeneous, so too should be your approach toward them.
Mistake 2: You take a siloed approach
Companies that do celebrate customer heterogeneity make another common mistake that prevents them from being customer-centric: all too often, they approach the issue in a siloed way. Maybe the sales team has one way of measuring a customer’s value and the marketing team has another, incompatible method. In other cases, some teams don’t even have access to any of this information, and end up making decisions in a vacuum.
Fix 2: Think and act in cross-functional terms
As customers move through the funnel, they will have more touchpoints with different parts of your organization. If your approach to them is siloed, it will be confusing and inconsistent. Instead, develop an organization-wide understanding of what customer-centricity means to your company, and look for opportunities to apply it in every department.
Mistake 3: Your metrics focus only on volume and cost
Traditionally, the only things we could measure to determine whether a company was succeeding was how much stuff they were pushing out the door and how much it cost them to do that. Today, we can measure so much more, and yet, too many companies still focus only on metrics that reflect volume and cost.
Fix 3: Use metrics that reflect customer equity
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