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Fader Week 6-PF Week 6 - p1

The document discusses customer centricity and how focusing on acquiring, retaining, and developing the most profitable customers can improve a company's performance. It argues that the traditional product-centric model is flawed and that customer centricity, when properly implemented, can lead to greater profitability. However, mastering customer acquisition, retention, and development is more difficult than often assumed. Key metrics like customer lifetime value (CLV) can help companies distinguish the most valuable customers and focus their efforts accordingly to improve performance.

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shanky1124
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51 views

Fader Week 6-PF Week 6 - p1

The document discusses customer centricity and how focusing on acquiring, retaining, and developing the most profitable customers can improve a company's performance. It argues that the traditional product-centric model is flawed and that customer centricity, when properly implemented, can lead to greater profitability. However, mastering customer acquisition, retention, and development is more difficult than often assumed. Key metrics like customer lifetime value (CLV) can help companies distinguish the most valuable customers and focus their efforts accordingly to improve performance.

Uploaded by

shanky1124
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PDF, TXT or read online on Scribd
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Week 6 Pod 1

CUSTOMER CENTRICITY

Customer Centricity: Focus on the Right Customers for Strategic Advantage


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The traditional product-centric business model is showing some cracks


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Commoditization, well-informed customers, globalization, etc.

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Customer centricity is a promising alternative but is not clearly understood


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Many firms that are touted to be customer centric really arent

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Celebrate customer heterogeneity: distinguish the profitable customers from the less profitable ones
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Emerging metrics such as customer lifetime value (CLV) make this possible

Show me the money!


Customer centricity can lead to improved profitability through greater effectiveness/efficiency in: !! Customer acquisition !! Customer retention !! Customer development You cant expect to be world-class on all three dimensions, but doing very well at even one of these could be highly lucrative for the company as a whole. But mastering each of these critical functions is a lot trickier than you think

Mo money
Balancing acquisition, retention, and development requires considerable skill (and analytical insight) If you had an extra dollar to spend, which of these activities would you allocate it to? Lets examine each tactic separately in order to learn the answer

Customer acquisition
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What metric is used by most firms to gauge and guide their acquisition activities? CPA (cost per acquisition) Big mistake! Would you use it for other kinds of acquisition activities (e.g., employees, technology, lawyers)? Firms should focus instead on: "! VPA "! Value per acquisition # which is CLV!

Customers acquired from Google on average have a higher lifetime value (mean CLV at $1,002) than customers acquired from other channels (mean CLV at $808). The difference is even larger for those whose firsttime purchase was off-line (mean CLV at $1,226 versus $959, respectively)

Marketing Science, Sept./Oct. 2011, p. 837-850

Customer acquisition: summary


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You must actively avoid having a CPA mentality


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Focus on ceilings instead of floors

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Celebrate heterogeneity by using CLV to drive acquisition strategies and tactics


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Be more patient/forward-looking when judging acquisition efforts

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In general, firms tend to underspend on acquisition, and underachieve as well

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