We’ve entered the era where every individual customer has unique ways to interact with brands and where every individual expects consistent delivery of engaging and valuable experiences from the awareness phase to the after purchases process, writes Bruno Sousa, Loyalty Strategist, Southern Europe, for Oracle.
The experience a brand provides to its customer is now as important as the actual product or service being delivered. This “Experience Economy” that we are living is the “perfect playground” for Customer Centricity Models to thrive, when compared to the Product Centric Models that ruled most companies’ organizations until now.
A Customer Centricity Model defines that:
- not all customers have the same importance to the business and
- a company’s products and services development and delivery are defined by the current and future needs of a group of customers, to maximize their long-term financial value to the company.
To be good at Customer Centricity, a company must be committed to identify the most important customers for the business, the engaged and the most profitable ones, and to dedicate the biggest part of the resources available to deeply understand what those customers want, and to deliver the products and the experiences they need.
It’s not that they are going to treat the other customers badly, but they will treat some better than others according to the level of loyalty and value for the business, with the clear goal of having a more profitable future for the company.
Customer Centricity demands brands to know their customers at a very granular level, first to be able to identify the segments of customers who are valuable from the ones who aren’t, and second to engage with them accordingly. If a company can’t look at their customers and know very well who is good and who is bad based on what they will be worth in the future, measuring Customer Lifetime Value in an accurate way — then it can’t be a profitable Customer Centric company.
Why does Customer Centricity Boost Retention and Profitability?
Today, the most successful brands in the world are the ones that own more data about their customers, and that’s not a coincidence.
These are the brands that better understand their customers, they know everything about them, their lifestyle, preferences, habits, hobbies and needs beyond the transactions within the brand. They use that data to extend customer’s lifecycle by engaging with them in a more timely, convenient, and relevant way, driving loyalty and profitability.
With a depth and breadth of permissioned data, brands can for example, execute test & learn to enable accurate studies on the impact that strategic changes in the marketing mix have in the behavior of their most valuable customers. This gives them a clear competitive advantage to their competitors who can’t. With all these insights, brands can build better value propositions for their customers in the present but, can also predict better what they will need in the future and, this way, adapt faster to behavior changes, to new trends or to market innovations and disruptions.
These organizations can make more money from their existing customers, because they boost customer engagement and experience to also capture share of wallet from more frequent purchases, to do better recommendations on new products and categories via cross-selling, or even up-selling with premium products or services with higher margins. It’s not about having tons of data, is about having the ability to transform all that data into actionable business insights to improve efficiency and profitability.
How Customer Centricity enables Better ROI on Acquisition
The Customer Centric model doesn’t give up on acquisition, it just changes the way to do it, looking to be more efficient to guarantee that the brand has the necessary resources to give the best service to their valuable customers. Customer Centricity suggests that the best acquisition strategy is developing customer relationships to a point where customers become advocates and ambassadors, that will speak up for the brand, bringing new customers by talking about the amazing experiences they have.
Being Customer Centric is also to know exactly the value of a customer, we understand the true cost and the true value of the acquisition so, we can better manage acquisition investments. Also, because we know so well the valuable customers’ profile, we know exactly who we are searching for, so we can do better targeting for new customers with the same profile, being more assertive at Marketing campaigns but also in store operations, in category management, in price management, etc., reducing acquisition costs and having better ROI.
The biggest portion of the customer base will not be the group of valuable customers where the brand will invest more resources in retention. But, this “less valuable” group remain important customers, and of course we want them to keep buying our products or services. We will just spend the less resources taking care of them and will also reduce the money we spent in trying to conquer customers like them.
The goal of a Customer Centric Organization is the same of a Product Centric organization, is to be profitable for the long term! According to the Gartner Group, “80 percent of your future profits will come from just 20 percent of your existing customers” meaning that the revenue sources that brands are trying to find out, are most likely inside their actual customer base, waiting to be nurtured and developed. There are already a lot of companies having great results by doing it very well!
Bruno Sousa has 10 years of experience in Consumer Engagement and Loyalty Marketing, studying, testing, learning and applying Customer Centricity in a variety of brands in different industries, in his roles with Sonae and Oracle.