Customer-centricity explained – what it means to be customer-centric

Customer-centric

Customer-centricity: what is it and what does it even mean to be customer-centric? Does it matter to define it or look at how people define it? It sure does! Definitions, models, views and approaches to be more customer-centric.

While customer-centricity isn’t new, it’s increasingly used in the context of, among others, digital marketing transformation, corporate ‘customer culture‘, customer experience (management), a customer-oriented business approach and the customer life cyle (including service etc.).

However, often we talk about customer-centricity without really knowing what we mean.

Being customer-centric: just common sense? – defining

Customer-centricity. It’s a word we’ve been using for ages – and probably many others – without really thinking too much about it but rather using it as an obvious given in business. The first question: what does it mean to be customer-centric?

It depends. Most of us use it in the sense of putting the customer at the center. Realizing that, regardless of time, creating customer value and really putting customers first, beyond a simple customer focus, it generates most and longest lasting business value. In this sense it’s common language. Customer-centric. As in anthropocentric, egocentric, geocentric or heliocentric.

It also depends on how you define the customer. Is it just the existing customer? Other stakeholders? Is it also the prospective buyer? And what about the customer of your customers (very important as Ram Charan reminds us – see below)? Or their – influential – social connections? Your employees? Suppliers? Channel partners? Journalists? PR, for instance, works better if we look at journalists as buyers who have a need (informing their readers or viewers properly) and making sure this way their publications thrive and survive.

All suppliers need to understand the consumer – based on Ram Charan – What the Customer Wants You to Know How Everybody Needs to Think Differently About Sales
All suppliers need to understand the consumer – based on Ram Charan – What the Customer Wants You to Know How Everybody Needs to Think Differently About Sales

Nowadays, in a reality of a connected customer, the increasing role of the customer experience and, among others, the multi-channel, omni-channel or channel-agnostic customer behavior, we are mainly using it in this context of integrating and/or connecting what we do around the customer so the customer has seamless experiences or, at the very least, finds what he needs in a fast and easy way, regardless of touchpoints.

The customer doesn’t want to see or experience how we are organized. He wants to be seen as a person and wants to find what he needs fast. He wants it easy. It goes for the navigation of the websites they visit, the interactions they have with a contact center, anything really.

They also are fed up with corporate blahblah content and advertising. Sure, they still want brochures and information on your business when they need it. But they don’t want the talk so many businesses still have when creating content or communicating about their beautiful selves.

Customer-centricity as a mission

As a term, customer-centricity, first trended when organizations started adopting customer relationship management and vendors of CRM software used it a lot. Last but not least, there’s the definitions given by smart marketers that shed another light on it and make it more tangible. There are several views but it’s good to know them. Not just for the sake of marketing theory, strategy and measurement but also because customer-centricity can’t just be an idea or a vague concept as it often was in the early days and really often still is today. I’ve never met an exec who said his company wasn’t customer-centric. They all pay lip service to it since many many years. Others are really convinced they are.

The famous customer experience delivery gap Bain and Company first published in 2005 - click for PDF
The famous customer experience delivery gap Bain and Company first published in 2005

Just look at the famous gap between how customer perceive customer service and/or customer experience and how executives perceive the performance of their organization in that context. That gap, depending on industry, is HUGE. Fortunately, there are also many organizations that get it or, at least, start getting it and, more importantly acting upon it.

So, that would probably be the main takeaway here: don’t approach it as a concept but embrace it as a mission, an – admittedly obvious – promise that is turned into action in a measured way and with responsibilities and clear goals.

Immediately the question arises whether customer-centricity then just becomes hard strategy. Well, yes and no. You need to plan, organize, educate, measure, etc. But you also need a customer-centric “mindset” across the organization. Some call it a culture but anthropologists don’t like that and what’s a corporate culture anyway?

Some call it “empathy” but that’s really a human trait that certainly helps being customer-centric. A strategic mind-set driven by a plan and deployed by “empathic” employees who simple care, can we call it that? Well, call it whatever you like but you need to have and nurture and even reward it. You need people and marketing, despite all the data-driven focus, is still a very human and emotional given.

Another important point is prioritization. You can be the most friendly, empathic and customer-focused person in the world but this is business and you just don’t have the rationale to NOT prioritize. You don’t need to be everywhere at the same time and with equal effort. After all, resources are not endless. But you do want to get at least the basics right across your entire organization and processes.

Usable Useful UsedIn other words: customer-centricity is also about how you work. And guess what: things work better when they are connected in function of specific business goals that will only be reached when the people involved take center stage: the buyer in marketing, the employee in the adoption of some internal IT system (usability),etc. So people too and most of all. Customer-centricity is even about a mind set and corporate culture too (without the fluff).

The three Us: Useful. Usable. Used. Something we “stole” from BT’s customer experience futurist Nicola Millard (and is described earlier on in a context of patterns here).

How does customer-centricity vs product-centricity benefit a company?

That was the second question at the #bizheroes chat. It’s not really this versus that though. Customer-centricity also means having a decent product or service to start with. If you look at product-centricity as focusing too much on the product instead of the customer, then you fail of course. No one buys a product that doesn’t respond to needs. Furthermore, customer-centricty doesn’t end with buying products. It’s part of a bigger picture. You want customers to buy again, you want to reduce churn. So, customer-centricty looks at the total customer life time value.

Product-centricity and customer-centricity - source Don Peppers - read on LinkedIn
Product-centricity and customer-centricity – source Don Peppers – read on LinkedIn

Don Peppers explained the difference between customer-centricity and product-centricity on LinkedIn a while ago.

Product-centricity, he says, starts with having a product or service that responds to customer needs and then getting as much customers as possible who have these needs. Customer-centricity starts with the individual customer and aims to meet the needs of that customer everywhere (all divisions) and as much as possible. So, both are not in conflict, strictly speaking.

What’s more important is that the financial objective for a company that competes in a product-centric way focuses on optimizing value created by each product, while customer-centricity focuses on optimizing value created by each customer. And that’s a crucial difference. It’s where the customer life time value comes in, where customer service comes in, the customer experience, the full end-to-end picture. The buying again, most of the advocacy, the retention and loyalty, etc.

We recommend you to read the article, visually illustrated here.

Customer-centricity: a hot topic – surprisingly – with many meanings

When Kelly Hungerford asked me to be a guest of this #bizheroes Twitter chat on customer-centricity and I looked at what was being sad about the topic lately, to our surprise it turned out that the “topic” is hot once again.

According to this article on MyCustomer.com, a great website on customer service, contact centers and, well, customer-centricity, the term customer-centricity is extremely popular nowadays as if it’s something new and even hyped. Shock!

UK Agency D. compares organization-centric and customer-centric in a post on inbound marketing
UK Agency D. compares organization-centric and customer-centric in a post on inbound marketing

The opening paragraph of that blog post, titled “Customer-centricity: It’s not what you think it is…” in full: “Customer-centricity and customer experience is in vogue at the moment. There has been a surge of white papers and books from all sorts of clever people; all the major consulting houses have large expensively assembled practices dedicated to it and every organisation seems to have stated strategies or ambitions to deliver customer-centricity.”

Wait a minute (it’s a nice read by the way): January 13 in the year 2015 (!) and customer-centricity is in vogue? The obvious place to do some fact-checking: Google Trends. And, indeed, customer-centricity seems to trend.

There is indeed quite some material from the major consulting houses and business publications that was written in recent days, weeks, months and years (Forbes, Harvard Business Review, E&Y, PwC, McKinsey, Deloitte, the list goes on, check out yourself). Research companies are also very occupied with customer-centricity these days although some of them use stronger terms. Just think about how Forrester Research puts virtually everything it publishes lately under the umbrella customer obsession.

I think the message is clear: organizations are advised to become more customer-centric, much more. And apparently there’s big bucks involved in helping them to be. So, it should be on the priority list of execs across the globe. And, as you probably know, it is, along with the customer experience.

Why is customer-centricity “hot” (again)?

A question that immediately comes to mind is of course why now or better: why only now? We know the answer. It has to do with a shift in control, it has to do with an increasingly digital customer, increasing expectations, the fact people like you and me want consistent experiences. The latter, simply said, means that, as mentioned, they don’t want to experience the organizational silos and disconnects that can make life so exhausting. They see a business as a whole and they want to be seen as a whole as well. Not as an email address or a segment or a series of interactions with various departments that don’t speak to each other with the frustrating consequences we all know. This is the kind of stuff that people who have been customer-centric before digital tools existed (or call it customer-oriented which some say is not the same) and people who care about customers and all sorts of digital marketing and user experience folks etc. know since quite some time now. It’s what the call center agents that cared enough to let angry customers shout because they knew it mattered and could make a big difference know since decades. It’s common sense. But common sense and business aren’t exactly synonyms.

Customer-centricity - research from Insites Consulting
Customer-centricity – research from Insites Consulting

Fortunately there’s also research and smart people doing smart thing to underpin it all. I mention just a few below and for once I also don’t have to go all too far. Just check out this article of my Belgian colleagues and friends of Insites Consulting (and the illustration on the right) at the occasion of research they did with the – also very smart – people of SAS Institute. Customer-centricity, after having known a peak period in the days when Customer Relationship Management became popular and CRM vendors promised everyone they would be more customer-centric buying this great new software (we know what happened, right?), today is hot again.

How do you become customer-centric?

To really move towards a customer-centric approach you need responsibility and ownership. Someone needs to be responsible to create that culture (with apologies to the anthropologists), identify the gaps, connect what needs to be connected, define customer-centric KPIs, watch over them and, in the end, be responsible for the customer. Some organizations try to do this with the a new executive role such as the Chief Customer Officer. Jeanne Bliss is a pioneer here. She wrote a book about it. It’s called “Chief Customer Officer – Getting Past Lip Service to Passionate Action”. The title says a lot, especially as it was written in 2006, nearly a decade ago. And all too often, even if a lot has changed in decade, lip service is still the name of the game.

Chief Customer Officer 2.0 - in a bookstore online or near you in June 2015
Chief Customer Officer 2.0 – in a bookstore online or near you in June 2015

Jeanne has a new version of the book, “Chief Customer Officer 2.0: How to Build Your Customer-Driven Growth Engine“. You can read more about it in our interview and check out what she writes on her blog Chief Customer Officer 2.0. Jeanne also co-founded the Chief Customer Officer Council or CCO Council and we updated an older blog post with new data showing that in 2014, 22% of Fortune 100 companies had a CCO.

Others hire a Chief Customer Experience Officer, put another C-level exec in charge (sometimes the CMO) or create some kind of committee or Center of Excellence with a board. Whatever way you organize it, you need to make people responsible. I‘m a fan of adding customer-oriented goals and KPIs to the scorecards or bonus plans in several cases because change is not always easy nor is buy-in and you need to act as an organization across all departments, processes and silos – ultimately.

Of course, before you get there, you also need to start somewhere. And, although responsibility and ‘leadership’ are essential, I’ve also seen some exceptions on that rule where the move towards customer-centricity didn’t come from the top but was embraced by the top. The proof of the pudding when improving the essence and low hanging fruit can help make a big difference, especially when there’s room for passionate people to take initiative.

By the way: the call to put someone in charge of an essential part of the overall customer-centric picture, the customer experience, isn’t new. When he was still at Forrester, customer experience pioneer Bruce Temkin did quite some research on it. In 2003, he found that 22% of larger organizations had someone in charge of the customer experience. It’s probably not a coincidence we focus on larger organizations here, just as it isn’t a coincidence we see most CCOs in larger organizations. They need them.

A final note on responsibility (and ownership): it’s not the same as ownership in the sense of “sole responsibility”. What we noticed in the beginning of the millennium when the concept of the CCO became reality was that very quickly discussions started about to which department the CCO should below. I feel that’s exactly the kind of questions we don’t need to look at (first). It’s probably not a shock if I say that many divisions don’t really trust, let alone know, each other. If you are in that situation and you say the CCO has to be part of marketing, for instance, you just might have a recipe for failure. So, assigning responsibility is key. A second crucial element, probably even more important, is to actually bring in the customer but that’s for later.

Customer-centricity, the Philip Kotler way

In all fairness and despite a certain renewed or at least much strengthened focus on customer-centricity, we must recognize that many of the earlier mentioned research firms and consulting giants did a lot of work around customer-centricity and the customer experience in long gone days. Just one example: Forrester and Bruce Temkin, whom we just mentioned.

And long before that, people like Philip Kotler or Professor Sandra Vandermerwe (whose work I unfortunately only discovered when doing some “research” for this article) talked about it as well. You can read a nice overview in this PDF I found, containing an article by Romanian Professor PhD Luigi-Nicolae Dumitrescu, called “Evaluating a customer-centric approach”. Do check it out. Philip Kotler uses the term customer-centricity in a somewhat other context (it’s also explained in the mentioned paper). He essentially broke down most commercial relationships into three categories as Professor PhD Luigi-Nicolae Dumitrescu writes. Price-driven, product-driven and customer-driven. You might know that in the meantime, Philip Kotler talks more about human-centric marketing since the publication of Marketing 3.0. Quote: “human-centric marketing is defined by brands that approach engaging their current and prospective customers via advertising and marketing tactics as whole human beings with hearts, minds, and spirits.”

Customer-centricity, the Peter Fader way

We’re not done yet. There is also a book about customer-centricity. Well, there are several ones but this one got a lot of attention since it was published in 2011. It’s called…Customer Centricty.

Customer Centricity - the book
Customer Centricity – the book

Customer-centricity, for Fader (and many others) simply means looking at the overall customer lifetime value or CLV and concentrating our efforts on those customer segments that were most valuable and interesting to optimize profit. Of course, focusing on the “best customers” and those with the highest potential isn’t new and it wasn’t new when Fader published his book.

If you’ve been in business for a while you probably remember messages such as “we need to look at the 20% (or 10% or whatever) of our customers who generate 80% (or 90%) of our business (yes, that good old weird Pareto principle). We need to sell more to them”.

Peter Fader on Twitter
Peter Fader on Twitter

It was, for instance, a typical narrative in the ICT channel industry where I started my career. “Sell more to those big ICT resellers, fill their warehouses”. Now and then it worked. Most of the time it didn’t or, after a while, products came back or less smart resellers who took too much stock went bankrupt, certainly when prices dropped and products stayed too long in the warehouse instead of where it ultimately belonged. Ouch. A smarter approach was to help these resellers sell more to their customers and help them get a footprint in new markets by enabling them do so. Aha! Of course, it makes sense to focus on your best customers and on those customers with the highest (potential) customer lifetime value. Things like up-selling and cross-selling do exist. At the same time, anyone knew that if you were really talking with customers and listening to them, also smaller ones, you could detect hidden gems, sleeping gold mines or apparently occasional small buyers who bought loads of stuff from your competitor. And sometimes you didn’t know! By the way when I’m talking about listening to your customer here, I’m talking about before the first commercial website went online and so certainly before listening got a “social” connotation.

Customer lifetime value and good old RFM - via Sociomantic
Customer lifetime value and good old RFM – via Sociomantic – the most valuable customers tend to continue to become even more valuable

Anyway, focusing on the right customers for strategic advance, as the subtitle of Peter Fader’s book goes, certainly makes sense. Let me quote Jim Sterne from, well, a quote on the homepage of Fader’s book: “Customer Centricity reveals how to increase profits from your best customers, find more like them, and avoid over-investing in the rest.” (when saying customer centricity Jim means the book). Truism. Especially the last part which I would rephrase as follows: do not waste time on stuff that will never pay off in any significant way whatsoever, regardless of the term in which you hope it pays off and of the ways it pays off that ultimately impact your bottom line. I hope you see why I wrote this difficult sentence. Think about it. I’m introducing a few things here: the element of time (from short to long term) andthe variety of ways to move from some kind of intermediate result or goal to the ultimate goal of making more money and increasing profits.

Not all customers are equal – depending on how you look at it

What Fader essentially wanted us to realize was that, despite good attentions to love all our customers and serve them all equally well (I won’t elaborate on how well we really treat our customers as that would REALLY makes this a long article) they are not equal. The customer isn’t always right and well, there are the “good” customers to focus on more and now and then those you really don’t want to invest time and effort in (anymore). Now and then some of us even “fire” a customer, tell them to take their business elsewhere. I know a few cases in “my line of work” where I totally get it. Imagine! That does happen, also today. Let’s not kid ourselves. Ask any sales rep, any CEO, anyone in real-life business and most of all, maybe, anyone who knows everything about metrics and analytics like Jim Sterne. The issue is that we live in a somewhat different world, to say the least and that the definition of customer-centricity should really be broadened a bit. And, anyway, most of you don’t think about customer-centricity in the sense Fader described it.

Knowing what your customers are worth is the secret to focusing your time and money where it makes the most difference. You can’t be all things to all people, so you need to learn to find out who really matters to your success.
Andy Sernovitz on Twitter
Andy Sernovitz on Twitter

Furthermore, there are so many intangible elements that impact our bottom line that focusing on “best” or “good” customers alone doesn’t cut it. I’m not even talking about the changing customer reality as we know it today, the role of things like influence or reputation and all that social media stuff which matters. I’m also talking about very basic things. Let’s take branding, for instance. I’ve worked with brands that spent millions on rebranding efforts. Sometimes I asked them if they had any idea what the impact of brand perceptions and other brand metrics (and shifts in those perceptions and metrics) had on their bottom line. You can measure that, you can include it in your marketing ROI (although the misunderstanding of marketing ROI often scares the hell out of brand marketers). Very often the answer to that question was….silence. Take it a step further. What’s the impact of great customer service? Customer experiences? Recommendations? Word-of-mouth? You see where I’m going. Look at Jim’s quote again, it’s the part where he says “find more like them”.

Measuring

These considerations and remarks do not mean I think the book isn’t worth the while. Peter Fader is not just your average author. He’s Co-Director of The Wharton Customer Analytics Initiative. And these people do some very smart things in the customer analytics field. And the people praising the book aren’t exactly dumb either. To explain the difference between customer-centricity and what we call customer focus or, if you like Forrester’s slogan of customer obsession, let me add the same infographic I used for the content marketing manifesto. It’s by the folks at Monetate.

What does it mean to be customer-centric?
What does it mean to be customer-centric?

To cut a long story short: yes, you should look beyond your best customers, more than ever, but, no, we shouldn’t be too naive either and measure a bit and prioritize now and then too. And there’s more. Many evolutions and customer realities in an über-connected world demand a revision of (some of) Fader’s views and customer-centricity can use a redefinition too, among others because the behavior and – yes, even definition – of the customer has changed and evolved as well.

Wrapping it up

Customer-centricity is not the same as what Forrester calls customer obsession. It’s not the same as what Gerry McGovern means when he says the customer is not king but dictator. And it’s not the same as the increasing focus on the customer experience and on customer service, the latter in the sense Joseph Jaffe described it in his manifesto, as the key business value generators for years to come. But it is all very much connected and in the end it’s the customer and the outcomes that matter. And being customer-centric is really, truly, genuinely and in so many proven ways utterly crucial. It’s still a surprise it took so many execs to understand that. 2015, just imagine. For now, let me end with a video of Peter Fader explaining his views. Think about them. Below that: the Storify board of the #bizheroes Twitter chat via Storify ( thanks Kelly Hungerford).

Customer-centricity Twitter chat – curated board

Top image purchased under license from Shutterstock