I recommend to all an excellent podcast with my colleague, Professor Peter Fader of The Wharton School, facilitated by Denise Lee Yohn: http://www.linkedin.com/share?viewLink=&sid=s977482175&url=http%3A%2F%2Ft%2Eco%2F4DDOixmO&urlhash=7Kd3&uid=5587948256073093120&trk=NUS_UNIU_SHARE-lnk
Peter is also the Co-director of Wharton’s Customer Analytics Initiative, and author of Customer Centricity: What It Is, What It Isn’t, and Why It Matters (Wharton Digital Press, Philadelphia, 2011), so he knows the title topics quite well. In the podcast he explains the differences between customer centricity and customer friendliness. In customer-friendly companies, all customers are served in an equally positive way. While on the surface customer friendliness appears to be a desirable concept and objective, it is suboptimal because there is, for all intents and purposes, no actionable customer segmentation. The reality is that all customers are NOT created equal, but customer friendly companies don’t recognize that fact. Poor customers are served as well as excellent customers, so this is an inefficient use of resources. In such companies, there is little lifetime value data (purchase and downstream advocacy behavior) generated, or leveraged, for individual customers.
Next, many companies are actively product-centric. As stated by Professor Fader, they believe that strategic advantage is based on the product and the expertise behind the product. The organizational structure (divisions, groups, and teams) are set up around products, employees are rewarded based on their ability to sell existing products or create new products, and brand equity is seen as having greater value than the customer. There are, however, cracks in this concept, due principally to globalization, speed of new technologies, deregulation, and the rising power of consumers (to get what they want, when they want it, and from whomever they select to provide it). Some companies, principally FMCGs like Coca-Cola and P & G, will (and should, according to Professor Fader) continue to be brand-focused and product-centric because of the difficulty of getting data on an individual customer basis. For the rest, product centricity puts them at risk relative to companies that are customer-centric.
Customer centricity, as Professor Fader points out, is a strategy to fundamentally align a company’s products and services with the wants and needs of its best customers and those which can readily be bootstrapped (through research segmentation tools such as advocacy level) to become more financially attractive. It is about identifying the most valuable customers and then doing everything possible to bring their (positive and negative) ideas into the center of the enterprise, create value for them, generate revenue from them, and to find more customers like them. That strategy has a specific business outcome goal: more profits for the long term. This objective is one that every enterprise would like to achieve; and, it can be attained if an organization is willing to move past outdated ideas about customer-company relations and rethink organizational design, key performance metrics, product development, and resource allocation.