What is a customer-centric organisation?

Most if not all companies believe themselves to be customer-centric, but there is often a disparity between the self-perception and the reality. It is easy to hang pithy slogans on the office walls – delivering on these values is a much greater challenge.

Customer-Centricity is a Mindset First

It is important to understand the difference between being merely customer-focused or friendly, and actively customer-centric. Customer-friendliness is a part of customer-centricity, but it is not the whole thing. A customer-centric strategy means putting the customer at the core of everything you do, and fostering that culture from the top down. The customer’s requirements must be at the forefront of your thinking throughout each of your processes, whether developing new products, planning marketing campaigns, at the point of sale or post-sale.

Prioritise Your Best Customers

For a customer-centric strategy to be effective, the customer has to be viewed as your most valuable long-term investment – beginning with an acceptance that there is no such thing as the average customer. Customers each demonstrate different habits and preferences, meaning a one-size-fits-all approach to marketing is a non-starter. It is incumbent upon an organisation to be able to identify, using customer data analytics, the segments of customers who are most valuable, rather than targeting the mean. Without that intrinsic ability to understand your customers at a granular level – and defining their value in terms of projected lifetime, not past, profitability – you simply cannot be customer-centric.

Similarly, there is no one-size-fits-all definition of a customer-centric organisation, but some of the leaders in customer satisfaction and loyalty share certain characteristics and principles. So what are they?

Anticipating What Your Customers May Need Tomorrow

Most fundamentally, it is imperative your business develops a holistic view of individual customers’ interactions and experiences throughout their relationship with your organisation. There must be a recognition that customers’ needs change over time and that your organisation must respond as or even before they arise. One of the best examples of this is Amazon, whose customer-centricity is unambiguously targeted at four primary customer sets: consumers, sellers, enterprises and content creators. Over the years it has developed a profound understanding of its customers, empowering it to deliver what consumers expect today and – perhaps even more crucially – anticipate what they may expect tomorrow.

Customer Centric-01

Operating 24/7 worldwide, Amazon boasts the most diverse customer-base but it recognised one core priority for all of its markets – to fulfil the customer’s need for the immersive, personalised and ‘always-on’ experience. It was this vision that drove the strategy behind the hugely successful Kindle eReader.

Amazon’s desire to innovate never wanes, and it sought to simplify the Kindle user experience – to allow their customers to sample, buy, download and read purchased, digitised content from a device even when on the move. For this to succeed, the device would require connectivity. Amazon’s ensuing partnership with Vodafone – another customer-centric business – saw to that, and in 2011 the first Kindle with 3G connectivity launched globally.

The Amazon / Vodafone collaboration exemplifies perfectly the idea that by focusing on the customer, anticipating their requirements and driving your strategy and product-creation around those needs, your organisation will go from strength to strength.

Customer Retention is King

Other core principles shared by prosperous customer-centric groups include:

  • Using customer data analysis to measure, better understand and segment your customers base
  • Identifying your most valuable customers
  • Focusing on products and services for those customers with the highest lifetime value
  • Demonstrating an across-the-board, top-down commitment to customer-centricity, across all channels
  • Engaging with customers from the outset
  • Designing and implementing processes and strategies from the customer’s point of view

Research across a variety of industries found increasing customer retention rates by a mere 5% increases profits by anywhere between 25% – 95%, while customer-centric organisations are around 60% more profitable than companies which eschew customer-centricity.

One way to figure out if a customer is high-quality – and therefore worthy of an investment targeting retention – is to calculate their customer lifetime value (CLV), which predicts the net profit a business will accumulate from its lifetime relationship with a customer.

Customer Lifetime Value (CLV)

Segmentation through customer data analysis enables you to customise your marketing campaigns across all channels to specific customer segments – investing more in the higher value customers. Instead of sending the same message to all of your customers, you can send tailored messages to customers who previously bought relevant products.

Customer lifetime value (CLV) is a part of the segmentation process – a means of measuring the profit your business makes from any given customer. It represents each customer’s value in monetary terms, and in turn informs an organisation how much its marketing department should be willing to invest in that customer.

There are numerous ways of calculating CLV however the most straightforward way of calculating Customer Lifetime Value uses the following formula:

CLV = (Average Order Value) x (Number of Repeat Sales) x (Average Retention Time)

The higher the value, the better the customer.

Becoming Customer-Centric

Making and delivering on the commitment to becoming a truly customer-centric organisation can be both protracted and complex, but it is an investment worth making. Becoming actively customer-centric, as opposed to merely paying it lip service, is the Holy Grail in terms of maximising customer value. Customer-centricity not only allows you to increase profits from your best customers, it enables you to avoid over-investing in the rest.

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