• March 9, 2015

Goodbye Average Customer, Hello Heterogeneity

When a multinational telecom company wanted to understand its churn rate, it took an unexpected approach: Instead of looking at the “average” behavior of customers across the board, it focused on the practices of long-term customers for clues as to what made them stay.

“In the old days, when we didn’t have the ability to see and measure differences, we had no choice but to create this idea of the average customer,” says Peter Fader, author of Customer Centricity: Focus on the Right Customers for Strategic Advantage and co-director of the Wharton Customer Analytics Initiative. “But today, because of technology and the strategic importance of understanding customer differences, that’s no excuse. In order to survive, businesses need to understand the differences in their customers’ tastes, eccentricities, etc.”

Discovering—and then celebrating—the heterogeneity of your customer base can make the difference between success or obsolescence. Cater to their diverse and individual tastes. Focus on the market-to-one approach. The time has come to flip the switch on the enterprise mind-set.

Looking in the Right Direction

Your customers expect it. They want a level of personalization with every transaction and purchase. So if you’re not looking beyond yesterday’s customer acquisition strategy, chances are the number of customers looking at you is on the decline.

For today’s enterprise to succeed, Fader says, it’s all about customer centricity, and it requires taking steps at the highest level, then integrating them throughout the organizational mind-set.

People used to say, “I’ve got a business to run, I can’t waste my time trying to understand customers.” That’s clearly laughable today. Understanding and personalizing for your customers is a requirement for not only retaining your base, but building on it.

Fader points to three key considerations to embracing the new customer-centric paradigm:

  1. Elevate practices to understand heterogeneity among customers. “You have to understand the range, nature, and differences of the customers. Marketers in general are doing a bad job of using the data that’s at their fingertips,” he says, pointing out that the CMO should be as on top of that data as the CFO is on the financials.
  2. Take it to the top. “Companies need to understand the differences between their customers at the C level. We have underestimated the importance of it. But things like corporate valuation are being driven by these differences.”
  3. Rethink CPA. Cost per acquisition should not be the focus of customer acquisition; Fader says to focus on the value of the customer. “If we think of customers as assets, why do we want to get them as cheaply as possible? In getting other assets—employees, attorneys—we don’t do that.” That just doesn’t fly for today’s enterprise.