Top positive review
5 people found this helpful
An Important Read on CLV in a World Where Competition is Changing
on November 4, 2011
Back in business school, I remember a marketing professor driving home the importance of customer segmentation by pointing out that the average American has one breast and one testicle. This pretty direct example showed that simple averages do not always produce meaningful information for business planning. Customers are not carbon copies, so why treat them all the same?
This concept of customer heterogeneity and the value of targeted segments is the topic of Professor Peter Fader's new book, Customer Centricity. Dr. Fader points out that customer centricity is so important now, because technological and geographic barriers are disappearing. Consumers are more connected than they have ever been, providing new options and empowerment. Competition is changing.
Customer centricity is a long-term strategy that puts relationships ahead of revenue in order to build customer equity for a business. Getting it right, can be a real differentiator, but so many companies with the best of intentions still get it wrong. This is reflective of the fact that there is no standard template for customer relationship management (CRM). Loyalty programs and CRM systems are just tools and not magic bullets. It takes a deep understanding of the business and behaviors to identify the right data, collect it, analyze it, draw the right conclusions, and take the appropriate actions. It takes an organization-wide commitment.
(Note: Customer centricity does not necessarily mean a focus on customer service.)
Dr. Fader paints some very successful businesses, such as Nordstrom and Apple, as very much NOT customer centric. It's true. They are brand and product centric, respectively. These businesses do not tailor their offering depending on the customer. Instead, they put forth a one-size-fits-all approach to managing customers. It has worked for them. While some businesses thrive today without a focus on customer centricity, today's consumers have quickly evolving expectations. Understanding the fundamentals of customer centricity and employing the proper data collection and analytical methods creates new strategic options.
Proper customer lifetime value (CLV) methodologies do not get the attention they deserve in today's business world, so this book is an important read. Customers represent assets with value to a business, much like stocks in a portfolio. You cannot optimize your portfolio to deliver maximum returns without understanding the fundamentals of proper valuation. This book provides a good overview of the implications of customer centricity and the importance of this type of thinking. Get a good grasp of it before your competitors do.
My only criticism is that this book reads like an extended introduction to a much bigger story that I want to dig into. It raises practical questions and points of debate around the valuation for trade-offs necessary to fully commit or transition to customer centricity. Just as I was ready to dig into the nitty gritty, I was at the end. I love data and stats, and I am a segmentation junkie, so I'd love to see a follow-up on this surprisingly often overlooked topic.